Preamble

The House met at a Quarter before Three of the Clock, Mr. SPEAKER in the Chair.

NEW WRITS.

For the County of Derby (High Peak Division) in the room of Sir Alfred Law, deceased.—[Captain Margesson.]

For the County of Stirling and Clackmannan (Clackmannan and Eastern Division) in the room of Lauchlan MacNeill Weir, Esquire, deceased.— [Sir Charles Edwards.]

Oral Answers to Questions — BRITISH WAR AIMS.

Mr. Leach: asked the Prime Minister whether he is willing to make known to the world, as part of Great Britain's peace terms, that, in addition to the overthrow of the menace of Nazi aggression, His Majesty's Government are ready to discuss with every European nation the establishment of a United States of Europe?

The Under-Secretary of State for Foreign Affairs (Mr. Butler): As the Prime Minister indicated in his reply to the hon. Member for Wolverhampton East (Mr. Mander) on 20th September, His Majesty's Government desire the formation of astable international system having as its object the prevention of war and the just settlement of international disputes by pacific means. They do not, however, regard it as desirable to commit themselves at this stage to any particular procedure for achieving this aim.

Mr. Leach: May I take it that the proposal in my question would not be ruled out by the Government if some Power raised it when the time came?

Mr. Butler: No such proposal would be excluded.

Mr. Hannah: Would not the Dominions have to be consulted?

Oral Answers to Questions — BOMBING OF CIVILIANS.

Mr. Mander: asked the Prime Minister whether he will consider the ad visability of proposing to the German Government that an approach should be made to the leading neutral States with a view to the appointment of a neutral com mission which could immediately proceed to the scene of any alleged bombing of civilians, so that a report could be presented stating whether, in the opinion of the commission, the bombing was de liberate or accidental; and whether he will furtherpropose that the belligerent Governments should be asked to give a pledge not to undertake reprisals until the report has been received, and not at all if the killing was held to be accidental?

Mr. Arthur Henderson: asked the Prime Minister whether, following President Roosevelt's further appeal with a view to safeguarding the lives of non- combatants as a result of aerial attack, His Majesty's Government will consider sympathetically ex-President Hoover's proposal for the establishment of a neutral fact-finding commission to investigate all air raids involving civilian populations?

Mr. Butler: While His Majesty's Government have every sympathy with the objects of this proposal and with that made by ex-President Hoover, they consider that the difficulties ofbringing the scheme into operation and of its functioning successfully would be almost insuperable. I would remind the House of what the Prime Minister said on 14th September that, whatever be the lengths to which others may go, His Majesty's Government will never resort to deliberate attack on women, children or other civilians for purposes of mere terrorism.

Mr. Mander: In view of the tremendous interests involved, does the right hon. Gentleman not think it worth while making an attempt, to see how far it may be successful?

Mr. Butler: We have had some experience of that sort of commission before, and, on that experience and on reconsideration, it seems that the difficulties would be almost insuperable.

Mr. A. Henderson: Has President Roosevelt made any protest to the German Government following the bombing of the civilian population in Poland?

Mr. Butler: I cannot say.

Mr. Noel-Baker: asked the Prime Minister whether he can make a statement concerning the bombing of Krzemieniec by German aircrafton 15th September and the action of the Diplomatic Corps led by the Papal Nuncio, Monsignor Cortesi, in asking their Governments to protest to Berlin?

Mr. Butler: His Majesty's Ambassador was at one period resident in the town in question, and reports that it was deliberately bombed with many casualties on 12th September. It then contained only the headquarters of the Polish Ministry for Foreign Affairs and the Corps Diplomatique, there being no military objective. I assume this is the occasion to which the hon. Member is referring. My Noble Friend has seen a report of the action described in the second part of the question.

Mr. Noel-Baker: Will the Government consider asking a body of impartial neutral persons of high authority to consider the evidence concerning the German bombing of Poland and to report whether it was not a violation of all the principles of international law?

Mr. Butler: No, Sir. I do not think that that is necessary. We have already ample evidence before us of indiscriminate bombing, and if any neutral evidence were required I would refer the hon. Member to an interview given in Paris by the United States Ambassador in Poland, in which he described his own personal experience of seeing indiscriminate bombing taking place.

Mr. A. Henderson: Would not such a report bring home to the German people the fact that such bombing was taking place?

Mr. Butler: That is why I referred to the evidence of an independent witness, the United States Ambassador in Poland, as to the experience he had himself undergone.

Mr. Noel-Baker: asked the Parliamentary Secretary to the Ministry of Information (1) whether he can make a statement concerning the bombing of

Vilna by German aircraft on 15th September and the number of civilians who were killed;
(2) whether he can make a statement concerning the total destruction of Siedlce by German aircraft and the burning of Lublin by incendiary bombs?

The Parliamentary Secretary to the Ministry of Information (Sir Edward Grigg): The Government's direct sources of information in Poland have, of course, been restricted and my Noble Friend has no first-hand information on the events with which the questions are concerned. He is, however, in a position to state that other reports in the Government's possession are not inconsistent with the suggestions made by the hon. Member with regard to the bombing and destruction of the towns to which he refers.

Oral Answers to Questions — ROLAL AIR FORCE

COMMUNIQUES

Squadron-Leader Hulbert: asked the Secretary of State for Air whether he proposes to issue an official communiquéat regular intervals giving details of what actions units of the Royal Air Force have been engaged in, together with details of outstanding achievements by the Service in all theatres of war, including home defence?

The Secretary of State for Air (Sir Kingsley Wood): A number of bulletins have already been issued from the Ministry of Information dealing with operations by the Royal Air Force, and particulars have also been published of incidents of special interest that have occurred. Information on these lines will continue to be issued through the same channels from time to time as the occasion arises.

Mr. Garro Jones: Will the right hon. Gentleman take into consideration a change in the former practice of the Ministry, under which it was considered improper to publish the names of officers and men who have been engaged in feats of military importance; and, particularly having regard to the practice of foreign Services,' will he publish those names in suitable cases?

Sir K. Wood: As a matter of fact, I have been discussing that matter, but the


hon. Gentleman will appreciate that there are other considerations which have to be taken into account.

Sir Percy Harris: Will the right hon. Gentleman consider following the example of the First Lord of the Admiralty and making a full statement of the work of the Air Force?

Sir K. Wood: Yes, Sir, I propose to do that.

AUXILIARY FORCE.

Squadron-Leader Hulbert: asked the Secretary of State for Air whether, in view of the incorporation of the Auxiliary Air Force with the Regular Force, officers and other ranks of the Auxiliary Air Force should now cease to wear the letter "A" on their uniforms?

Sir K. Wood: No, Sir. I understand that members of the Auxiliary Air Force take a natural pride in, and are happy to be identified with, that force. It is not, therefore, proposed to issue instructions that members shall cease to wear the distinguishing badge.

Mr. Anstruther-Gray: Will my right hon. Friend be careful not to encourage senior officers with negligible service to pose as superior to junior officers with considerable service?

Flight-Lieutenant Grant-Ferris: Does my right hon. Friend realise that these men treasure that "A" as symbolic of all their traditions, and are grateful to my right hon. Friend for his answer?

EVACUATED STAFF.

Mr. Sorensen: asked the Secretary of State for Air whether he is aware of discontent among the evacuated staff respecting the increased expense of maintainingthemselves in the new area and also their London homes; and whether he will consider granting periodic long week-end leave to the staff, together with the issue of warrants, to enable them to visit their homes at greatly reduced rates or without charge?

Sir K. Wood: The matter referred to which affects more than one Government Department, is, I understand, now under discussion between the Treasury and the staff side of the National Whitley Council.

Mr. Sorensen: Can the right hon. Gentleman say when we are likely to have some public announcement, or whether

the staff are likely to know at an early date as to what facilities are to be given them?

Sir K. Wood: I will inquire, and let the hon. Member know at an early date.

BALLOON BARRAGE CREWS (WIRELESS SETS).

Squadron-Leader Hulbert: asked the Secretary of State for Air whether he will arrange for the issue of portable wireless receiving sets on isolated balloon- barrage sites in order to relieve the tedium of the crews' duties?

Sir K. Wood: It would not, I think, be practicable to arrange for the supply of wireless sets at the cost of public funds, but I am considering the problem generally and will communicate further with my hon. and gallant Friend as soon as possible.

AIRCRAFT INDUSTRY.

Mr. A. Edwards: asked the Secretary of State for Air whether it is in tended to take over outright control of the aircraft industry?

Sir K. Wood: No, Sir. I do not contemplate that it will be either necessary or desirable for the Government to take over the direct control of the aircraftindustry. It is, of course, possible that experience of war conditions may show that adjustments are necessary in the relations between the Air Ministry and the aircraft industry, and if this proves to be the case the House can rest assured that such adjustments will be made.

Oral Answers to Questions — CIVIL AVIATION.

ENGLAND—FRANCE SERVICE.

Mr. Simmonds: asked the Secretary of State for Air whether it is intended, at an early date, to permit a civil air ser vice between the south-west of England and France?

The Under-Secretary of State for Air (Captain Harold Balfour): The resumption of a regular commercial air service between this country and France is at present under consideration.

IMPERIAL AIRWAYS, LIMITED.

Mr. Simmonds: asked the Secretary of State for Air the relations between Imperial Airways, Limited, and National Air Communications?

Captain Balfour: Under an agreement dated 9th June, 1937, the property of the company is required in any emergency to be placed at the disposal of my right hon. Friend. The organisation is being utilised as part of the National Air Communications organisation, under the general direction of the Director-General of Civil Aviation.

Mr. Simmonds: Is any movement being made at the present time towards a merger between Imperial Airways and National Air Communications?

Captain Balfour: That is a question that the hon. Gentleman should put down.

Oral Answers to Questions — TRANSPORT.

RAILWAY ADVERTISEMENTS.

Sir Arnold Wilson: asked the Minister of Transport whether he will instruct the Railway Operating Service to refuse in future all advertisements calculated to stimulate the sale of commodities the consumption of which the Government desires to restrict, or which are likely to be rationed?

The Minister of Transport (Captain Wallace): The question whether restrictions of this character should be applied universally is one of general policy, affecting all Departments concerned with rationed commodities, and I see no present justification for imposing a restriction of this nature on railway companies only.

MOTOR VANS, LABELS.

Mr. Naylor: asked the Minister of Transport whether Lipton's, Limited, have authority from his Department to use a "food-urgent" label on their motor vans; and whether such label carries with it any privilege or priority on the road?

Captain Wallace: No, Sir, and I am glad to take this opportunity of making it clear that a label of this kind carries no right to privilege or priority on the road.

TRAFFIC MOVEMENT (FOG).

Sir Robert Young: asked the Minister of Transport whether it is his intention, in view of the increased danger to the travelling public, especially in London, caused by winter fogs, to make

arrangements and issue instructions beforehand which will facilitate more easy transport and prevent an increase of accidents and deaths in the absence of proper safeguards governing such weather conditions?

Captain Wallace: I hope that the aids to movement already provided in the form of white lines and the like, coupled with the use of a specially designed mask for headlamps witha dipped beam (which will shortly be available), will permit of traffic movement in fog without more than usual difficulty.

Viscountess Astor: Is it not easier for people to see the white lines when they are completely sober?

MOTOR VEHICLES (REQUISITIONING).

Mr. Leslie: asked the Minister of Transport whether he will consider the advisability of instructing area commissioners of transport to make garaging arrangements before requisitioning vehicles so as to prevent the leaving of vehicles in open fields and roadsides ex posed to all weather unfitting them for use when occasion calls for their service?

Captain Wallace: I have no control over the impressment of vehicles for the armed forces; and my officers have not so far requisitioned vehicles except at the instance of local authorities or military units who thereupon become responsible for the conditions under which vehicles are taken over and returned. The Commissioners are not, therefore, in a position to take the action which the hon. Member suggests.

Mr. Leslie: Would it not be advisable to advise local authorities to take care, especially in air raids, that, instead of vehicles being left on the side roads and becoming playthings for children and probably supplying accommodation for casuals, proper provision is made?

Captain Wallace: I will certainly convey the suggestion of the hon. Member to my two right hon. colleagues who are concerned with the action of local authorities in this matter.

HORSE-DRAWN TRAFFIC, LONDON.

Mr. Joel: asked the Minister of Transport whether, in view of the reduced amount of transport in London and the desirability of economising petrol, he will


arrange temporarily to cancel the regulations preventing horse-drawn traffic from using certain London streets?

Captain Wallace: I propose to make an Order under the Defence Regulations which will have the effect desired by my hon. Friend.

ROAD HAULIERS.

Mr. De la Bère: asked the Minister of Transport whether he will take steps to safeguard the interests of the old-established road hauliers throughout the country, whose livelihood is at present being threatened as a result of the proposals which have been put forward by the railways to divert their normal traffic?

Captain Wallace: I cannot accept the implication that the interests of road hauliers are threatened by proposals of the railway companies; on the contrary I hope that the effects of the rationing of petrol may be mitigated by co-operation between the hauliers and the railway companies.

Mr. De la Bère: Is it not the fact that the president of the executive of one of the main line railways and the general manager of another main line railway are actively engaged in every endeavour to destroy the livelihood of the road hauliers?

Captain Wallace: No, Sir; I most emphatically repudiate that suggestion.

Mr. De la Bèere: Will the right hon. Gentleman look into the matter and really find out whether that is not the case?

" C" MOTOR LICENCES.

Mr. Harold Mitchell: asked the Minister of Transport if he will consider, as a temporary measure, the relaxing of restrictions on "C" licences to enable owners of such vehicles to co-operate with each other to use them to the maximum advantage?

Captain Wallace: I have already made an Order which gives effect to my hon. Friend's suggestion.

RAILWAY FARES.

Mr. W. H. Green: asked the Minister of Transport whether he is aware that, owing to the withdrawal of cheap fares on the railways, many parents of the poorer class will find it impossible to visit their children who have been evacuated;

and, as this may lead to many parents bringing their children back to dangerous areas, will he make such representations to the railways as may make possible the issue of cheap tickets to parents for this purpose at stated intervals?

Sir Richard Wells: asked the Minister of Transport whether he is aware of the hardship and inconvenience caused by the withdrawal of cheap day tickets on the London suburban railways; and whether it will be possible to restore them at an early date?

Captain Wallace: I would refer to the reply which I gave on this subject to the hon. Member for Leyton, West (Mr. Sorensen) on 20th September. I am sending the hon. Members a copy of that reply to which, as at present advised, I cannot add anything.

Mr. Green: Is the Minister aware of the serious position in which the poorer parents are being placed in that they will be unable to visit their children who have been evacuated and that many of us have received many letters from parents stating that their children will be withdrawn?

Captain Wallace: If the hon. Gentleman will be good enough to read the reply to which I have made reference to-day, I think he will recognise that I cannot at the moment add anything to what I said a week ago.

Mr. Thurtle: Is the right hon. and gallant Gentleman aware that this is a very real grievance in the East End of London, and will he at least promise to reconsider the question fairly quickly?

Captain Wallace: If the hon. Gentleman will look at the answer to which I referred he will see that I have promised to do so, and I will.

Mr. Sorensen: Seeing that he has referred to the answer given to me last week, may I ask the right hon. and gallant Gentleman whether he will not at an early date announce to the general public, and to those who have been evacuated, some facilities to enable people to visit their children and relatives in the way suggested?

Captain Wallace: I am bound to repeat that I must have regard to the considerations which I set out in the answer to which I have already referred.

ROYAL NAVY.

WORKERS'PAYMENT, WEST FIFE.

Mr. Gallacher: asked the First Lord of the Admiralty whether he is aware that on 2nd September a number of unemployed men in West Fife received telegrams asking them to start work at Longannet depot, where they worked one shift, after which they were informed that their services were no longer required; that as a result they lost one day's money at the Employment Exchange and have received no payment from the Admiralty; whether he will see that payment is made for the time worked and that alternative employment is found for these men who responded so quickly when appealed to?

The Parliamentary Secretary to the Admiralty (Mr. Shakespeare): I am making inquiries into the cases to which the hon. Member refers, and will let him know the result.

Mr. Gallacher: Will the Minister make inquiries into the whole conduct of the employment of labour in this area, because there has been a continued series of complaints during the past two or three weeks in connection with the treatment of men who have been sent by the Employment Exchange?

Mr. Shakespeare: I will consider that matter.

HIS MAJESTY'S SHIP "COURAGEOUS."

Rear-Admiral Sir Murray Sueter: asked the First Lord of the Admiralty whether, after full consideration, he is satisfied that the protection given to the aircraft carrier "Courageous" was sufficient; and, if not, can he give an assurance that in future instructions will be given that aircraft carriers when proceeding throughwaters where submarines may be expected will have the same protecting screen of destroyers as is given to battleships?

The First Lord of the Admiralty (Mr. Churchill): I cannot undertake to hamper the judgment of experienced sea officers by any general ruling as to the degree of risk they should accept. This must depend upon the need or opportunity of the moment and the resources available. For the rest I would refer my hon. and gallant Friend to the remarks which I made yesterday on this subject.

AIRSHIPS.

Sir M. Sueter: asked the First Lord of the Admiralty what recorded opinion there is in his office as to the value of small airships in the last war as escorts for ships carrying food and raw materials to our home ports and if there is any recorded case of a merchant ship being sunk by a submarine when under small airship escort; what was the number of small airships and airship stations built in the late war; and whether the Admiralty now possess any small airships or intend to develop airshipsthat can hover for helping to combat submarines?

Mr. Churchill: During the last war the Admiralty built over 200 airships, including a large fleet of Zeppelins and 10 airship stations. Except for the useful patrolling work of the little Blimps around the harbours they were not otherwise of much military value. To-day the Admiralty possess no airships, but in view of their small offensive value against submarines, and their extreme vulnerability to attacks from enemy aircraft and from the anti-aircraft armament of U-boats, there is no need to deplore our deficiency in this respect.

GERMAN STEAMER "BREMEN."

Mr. Lipson: asked the First Lord of the Admiralty whether he is able to state the present whereabouts of the German liner "Bremen "?

Mr. Cassells: asked the First Lord of the Admiralty whether he can make any statement concerning the present whereabouts of the "Bremen "?

Mr. Churchill: The German steamer "Bremen" is believed to be in a Northern Russian port.

Sir William Davison: Can my right hon. Friend say whether it is possible for an enemy ship to change her nationality when on the high seas or in port?

COCOA INDUSTRY.

Mr. Sorensen: asked the Secretary of State for the Colonies whether he intends to implement the recommendations of the West Indian Royal Commission and the West African Commission on the cocoa industry; or whether this has to be suspended during the present war?

The Secretary of State for the Colonies (Mr. Malcolm MacDonald): The West India Royal Commission has not yet reported, and the question of implementing its recommendations does not therefore, at present, arise. As regards the report of the West African Cocoa Commission, the outbreak of war has materially affected the prospects of the cocoa industry, and the new situation is receiving my urgent attention.

Mr. Sorensen: Can we take it from the reply of the right hon. Gentleman that when the recommendations are published there will be no hesitation in applying them, if circumstances permit, during the continuation of the war.

Mr. MacDonald: That is another question, and perhaps the hon. Member will put it down.

WEST INDIES (COMMISSION'S REPORT).

Mr. Riley: asked the Secretary of State for the Colonies whether he has yet received the report of the Royal Commission on Conditions in the West Indies; and when will it be available to Members?

Mr. M. MacDonald: The answer to the first part of the question is in the negative, though I understand that the report is in an advanced state of preparation. The second part of the question does not, therefore, at present, arise.

CIVIL DEFENCE.

EVACUATION.

Mr. Ede: asked the Minister of Health whether his attention has been called to the written request of the billeting officer for part of the Tarvin Rural District, Cheshire, that the rural district council, as billeting authority, should prosecute J. Jackson, of Newstead House, Tarporley, for refusing to comply with a requirement for billets thrice made on him by a billeting officer, on the third occasion accompanied by a police officer, Jackson having eight habitable rooms and only two persons resident therein; whether he is aware that the council have declined to take action and have thereby caused grave dissatisfaction to many people who, having less accommodation than Jackson, complied with the billeting

officer's requirements; and will he ask the council to reconsider their refusal or himself take action to support the billeting officer?

The Parliamentary Secretary to the Ministry of Health (Miss Horsbrugh): My right hon. Friend's attention has been drawn to the matter by the hon. Member himself, and he is having inquiries made. When those inquiries are completed my right hon. Friend will communicate with the hon. Member.

Mr. Ede: Can the hon. Lady say how long these inquiries are likely to take, as this happened more than 20 days ago?

Miss Horsbrugh: We are aware of that, and I think the hon. Member will agree that there are some particulars about this case which ought to be looked into. There is the question of age and ofillness, and we feel that these particulars should be looked into before a definite statement is given.

EVACUATION (SCOTLAND).

Mr. J. J. Davidson: asked the Secretary of State for Scotland whether educational facilities now exist for the teaching of children evacuated to Inverary; and, if so, what are the educational arrangements?

The Under-Secretary of State for Scotland (Captain McEwen): The answer to the first part of the question is in the affirmative. With regard to the second part, my right hon. Friend has not in his possession precise details of the arrangements made in Inverary, but he understands that the children transferred to this district under the evacuation scheme began to attend school on Monday, 25th September.

Mr. Davidson: asked the Secretary of State for Scotland the number of mothers and children who have returned to Glasgow from the evacuation centres?

Captain McEwen: On information supplied by the Ministry of Labour, it is estimated that nearly one-third of the mothers have returned to Glasgow. My right hon. Friend regrets that he is not yet in a position to state the number of children who have returned, and the reports which have been received indicate that the tendency to return has been stronger in the case of mothers than inthe case of children.

Mr. Davidson: Is the Minister aware that many of those mothers have taken their children—some of them two or three children—back again into the danger zone because of certain conditions prevailing in the areas into which they were evacuated, and can he assure us that every step is being taken to clear up and better those conditions so that those people can be returned?

Captain McEwen: There are many reasons which have governed the mothers in returning to the danger zone, and it is a fact, which is greatly regretted by the Government, that so many should have done so.

Mr. Davidson: Is the hon. and gallant Gentleman aware that in the Aberdeen-shire district the farmers treated them as if they were cattle?

FIRST AID POST, EAST ARDSLEY.

Mr. Lunn: asked the Minister of Health whether he is aware that the requisitioning officer in the West Riding of York has commandeered a new working men's club in East Ardsley as a first-aid station, and 450 members, railwaymen, miners, and kindred trades have been turned out at an hour's notice without any possibility of suitable alternative accommodation in the locality for social intercourse, and, as there are several suitable halls which might be used as a first-aid station, and in order to avoid any industrial upheaval in the district, will he see that the club is restored to its members?

Miss Horsbrugh: A proposal to establish a first-aid post in the building referred to was submitted to my right hon. Friend early in the year by the West Riding County Council. As the proposal came from the responsible local authority, and as no objection was made and the building and the situation were both suitable for a first-aid post, my right hon. Friend approved it. My right hon. Friend is, however, making further inquiries and will communicate with the hon. Member.

Mr. Lunn: In view of the fact that this is a most unusual requisition and affects a large number of key men in industry and as there was no opinion from the club in favour of requisition, will the Minister reconsider the first decision and see that there is a change?

Miss Horsbrugh: The hon. Member will realise that this proposition was put up to the Minister for approval by the West Riding County Council at the beginning of the year and no objection was taken then, but in the light of what the hon. Member has put forward, the matter is being looked into again.

Mr. T. Williams: In view of the fact that there are other suitable halls in the neighbourhood and that this is the only "home from home" for a number of miners and others, will the Minister take into consideration the fact that the men affected are key men in industry?

Miss Horsbrugh: It is because of that fact that the matter is being gone into again.

MOTOR VEHICLES (NOISE).

Mr. Remer: asked the Secretary of State for the Home Department whether his attention has been called to the noise caused at night and early morning by the grinding of brakes by omnibuses and motor lorries for continuous periods which closely resemble air-raid warnings; and, as these noises can easily be avoided, will he take steps to prevent such inconveniences?

The Secretary of State for the Home Department (Sir John Anderson): The noise which I think my hon. Friend has in mind is due, not to thebrakes, but to the transmission; and he is mistaken in thinking that it could easily be avoided or rectified. I recognise that this noise might at first be mistaken for the beginning of an air-raid warning, but it could give rise only to a momentary misapprehension for, unlike the air-raid warning, it does not rise and fall and does not last for two minutes.

Colonel Sandeman Allen: Are not peculiar noises also produced by a dreamer?

Mr. Remer: Is my right hon. Friend aware that if he lived on any of the main trunk roads, he would realise the serious nature of the position in this respect?

FRIENDLY ALIENS.

Mr. R. Morgan: asked the Home Secretary whether he will consider the desirability, instead of interning enemy able-bodied alien refugees, of employing


them on work on the land and other tasks of a similar nature which are needed in the national emergency?

Sir J. Anderson: As I have already stated, tribunals have been appointed to examine the cases of all Germans and Austrians with a view to considering which of them can be exempted from internment on the ground that their sympathies are with this country rather than with the enemy; and it is proposed to make use of the help of friendly aliens in any direction in which their assistance will be advantageous to this country and can be utilised without interfering with the interests of British subjects.

SHOPS (EARLY CLOSING).

Mr. Leslie: asked the Home Secretary whether, in view of past experience in the breakdown of voluntary arrangements for early closing of shops, he has yet decided to issue a general closing order in the interests of national economy, the saving of light and fuel, and to enable assistants to reach their homes within reasonable hours by releasing them within 15 minutes after the closing hour?

Sir J. Anderson: I have been in consultation with some of the principal trade associations concerned and with some of the larger local authorities. The necessary inquiries are nearly completed and I hope to be able to reach a decision next week.

AIR-RAID PRECAUTIONS (WORKERS' REMUNERATION).

Mr. Anstruther-Gray: asked the Home Secretary whether he can state the numbers and categories of air-raid pre cautions workers who are receiving higher remuneration than members of the Fighting Forces of equivalent status and responsibility; and is he satisfied that none of this work could be done by voluntary effort?

Sir J. Anderson: The Government have made it clear to local authorities that the employment of persons on a paid basis should not be allowed to replace the system of using suitable volunteers who are willing to undertake duty without payment. It is not possible to draw any exact comparison between the status and responsibility of civil defence volunteers and those of members of the Fighting Forces, as suggested by my hon. Friend, but the flat rate of allowance for civil

defence volunteers undertaking whole-time duty was determined with due regard to Army rates of pay and allowances.

Sir Irving Albery: Is it fully realised that those who give voluntary service cannot be asked to give the same amount of time to the work as those who are paid?

Sir J. Anderson: That is fully realised and that is one of the reasons why a certain proportion of persons who are under the obligation to give full-time service is required in most areas.

RESPIRATORS.

Mr. Ellis Smith: asked the Home Secretary what steps have been taken to examine gas respirators; what is to be the procedure for the future in order to maintain and be sure of their efficiency; what proceedings have been taken against per sons not carrying a respirator; and under what powers have such proceedings been taken?

Sir J. Anderson: Local authorities have been advised, since the general distribution of respirators was made, that they should arrange for periodical inspection of respirators in the hands of the public. As regards the last part of the question, there are no such powers.

Mr. E. Smith: asked the Home Secretary whether he is aware of the concern over the lack of respirators for young children and babies, and a circular issued by a county chief constable advising mothers to take their children to an up stairs room and ensure that every door and window in the house is locked; what steps are being taken to expedite de livery; and on what date is it expected that there will be supplies for all?

Sir J. Anderson: These protective helmets are being distributed rapidly, but they cannot be issued to all areas simultaneously and the more vulnerable areas are being supplied in priority. I have seen the circular to which the hon. Member refers, and the precautions which it recommends would in my opinion be appropriate in any contingency in which the special protective device was for any reason not available.

Mr. Smith: Will the right hon Gentleman take steps to expedite and increase the production of these respirators?

Sir J. Anderson: I assure the hon. Member that every possible step is being taken.

Colonel Nathan: What steps are being taken to supply these respirators to hospitals, dealing with children and babies; and how soon may we expect a regular distribution of them?

Sir J. Anderson: Perhaps the hon. and gallant Gentleman would put that question down.

COMPULSORILY CLOSED BUSINESS PREMISES.

Captain Plugge: asked the Attorney-General whether the Government proposes to introduce legislation to safeguard the common law financial interests of those who have been compelled, by Government decree, temporarily to close their business premises either in whole or in part?

The Attorney-General (Sir Donald Somervell): I am not clear what form of Government decree my hon. Friend has in mind. If he will give me particulars I will have it looked into.

HORTICULTURAL PRODUCE (SALES ON COMMISSION) ACT, 1926.

Mr. T. Williams: asked the Minister of Agriculture whether he is satisfied that the Horticultural Produce (Sales on Commission) Act, 1926, has served the purpose intended; and, if not, will he consider the advisability of taking power to appoint accountants who can investigate the books and records of salesmen on behalf of fruit and vegetable producers?

The Minister of Agriculture (Colonel Sir Reginald Dorman-Smith): The answer to the first part of the question is in the negative. Before the outbreak of war preliminary consideration was being givento the desirability of further steps to regulate commission sales in the horticultural trade, but in present circumstances I can hold out no hope that legislation will be introduced to deal with this matter.

Mr. Williams: Are we to take it from the reply of the right hon. and gallant Gentleman that before any further annual returns of crops of soft fruit are forthcoming the Government will take some

steps, in view of the failure of the 1926 Act?

Sir R. Dorman-Smith: That is another question.

MINISTRY OF INFORMATION.

NEUTRAL COUNTRIES.

Lieut.-Colonel Sir Thomas Moore: asked the Parliamentary Secretary to the Ministry of Information whether he is satisfied with the methods being adopted by the Department for spreading the truth about the war in neutral countries; and whether he can give the House any indication as to what these methods are?

Sir E. Grigg: The reply to the first part of the question is in the affirmative. As regards the second part, my Noble Friend is afraid that the matter is not one in which he feels that he can undertake to go into detail.

Sir T. Moore: Can we have an assurance from my hon. Friend that the fullest possible information as to the development of the war, and our part in it, will be given to neutral countries, and incidentally to ourselves?

Sir E. Grigg: Yes, Sir, I think I can give my hon. and gallant Friend the most complete assurance.

Viscountess Astor: Does my hon. Friend realise that if the Department are satisfied, they are about the only people in the world who aresatisfied with the way our war news is brought to neutral countries? It is an absolute disgrace which is enough to make the Government wipe out the whole of them?

Mr. Noel-Baker: Is not one of the great difficulties the lack of telephonic and postal communications with neutral countries, and will the Ministry of Information get into communication with the Post Office to try and improve these communications?

Sir E. Grigg: The hon. Member is quite right. There has been some considerable difficulty on the purely mechanical side, but I can assure him that these difficulties are being very rapidly overcome.

WASTE AVOIDANCE.

Sir A. Wilson: asked the Parliamentary Secretary to the Ministry of


Information whether, with a view to impressing, by advertisement, upon the public of this country the need for economy in the use of commodities, he will give full publicity to the recent statement of the Finance Minister of France that waste of consumption goods is a crime; and that the winner is he who produces most and consumes least?

Sir E. Grigg: My hon. Friend will be glad to know that arrangements are already well in hand for giving wide publicity to the urgent need for the avoidance of waste. This should not, of course, be taken as implying any desire on the part of the Government to discourage, in any way, the wise and economical buying and selling of goods and services, upon which the trade and general well-being of the community depend.

Sir A. Wilson: Will the hon. Member see that this is put across at the B.B.C. by a real live Minister and not by a B.B.C. spokesman?

Mr. George Griffiths: Is the Minister aware that the old age pensioner will not require this information?

FRANCE (LIAISON ARRANGEMENTS).

Colonel Arthur Evans: asked the Parliamentary Secretary to the Ministry of Information whether he is aware that on 5th September an English-language newspaper, published in Paris, printed a message as coming from London and as being sent by Havas, the official French news agency, stating that London and the North of England had been bombed; that two days later the Paris "Soir" published a graphic account of an air fight over the River Thames; and whether there is any machinery of liaison between the British and French Ministries of Information which will enable the French authorities to check up the facts with, the British before approving of their publicasion in papers published in France?

Sir E. Grigg: My Noble Friend cannot, of course, accept any responsibility for the reports in question. According to hisinformation, however, the report mentioned, as sent by the Havas agency, related only to an air-raid warning. In reply to the last part of the question, a liaison officer of the Ministry was, in fact, sent to Paris on 12th of this month,

and arrangements are in contemplation for further strengthening the liaison arrangements.

BROADCAST PROGRAMMES.

Mr. Naylor: asked the Parliamentary Secretary to the Ministry of Information whether he will request the British Broadcasting Corporation so to arrange the evening programme as to allow the concert or amusement item to follow instead of preceding the nine o'clock news item and subsequent talk?

Sir E. Grigg: My Noble Friend is bringing the hon. Member's suggestion to the notice of the British Broadcasting Corporation.

BRITISH BOARD OF FILM CENSORS.

Mr. Mander: asked the Parliamentary Secretary to the Ministry of Information whether he will state, with reference to the work carried out by the British Board of Film Censors for him, what payment is made by the board to the Ministry out of its profits in return for the extra business brought to the board; what reinforcement of staff supplied by the Ministry has been added to the board; and by whom this is paid?

Sir E. Grigg: The British Board of Film Censorsis not a commercial undertaking for the purpose of making profits. The agreement between the board and the Ministry by which the board act as agents for the Ministry in the censorship of films, provides that the cost of any additional staff required by the board in that capacity shall be met out of the board's fee-income in so far as surplus funds are available, and, if not, shall be met from public funds. It has so far been found necessary to employ five additional persons, of whom three belong to the manipulative grades. The cost of this additional staff will be allocated on the basis stated above.

STAFF.

Sir Smedley Crooke: asked the Parliamentary Secretary to the Ministry of Information what are the duties of a Press liaison officer in the Ministry; how many of such officers are employed; and what salaries they are paid?

Sir E. Grigg: The duties of a Press liaison officer in the News Division of the Ministry of Information are to distribute to the Press the news bulletins, etc.,


issued by the Division; to amplify these bulletins in talks to the Press representatives and to answer inquiries on them; to arrange interviews with members of the Specialist Sections of the Division when Press representatives desire further elucidation or make inquirieson particular points; and generally to assist Press representatives in all matters affecting the News Division and the Censorship Division. Seven officers of this grade are employed because the service has to be continuous over 24 hours; their salaries are at the rate of £650 per annum.

Sir Smedley Crooke: Is my hon. Friend aware that some of these officers are carrying out duties usually undertaken by office boys? Will he make inquiries into that?

Sir E. Grigg: If the hon. Member can give me an example of what he means I shall be very grateful to him. I have not seen that myself.

Sir P. Harris: Are any of these seven men trained journalists or can the hon. Member say what are their particular qualifications for their job?

Sir E. Grigg: I cannot answer off-hand with regard to the qualifications of the liaison officers, but practically all the officers employed on these duties in the Ministry have had previous experience of liaison work with the Press.

Mr. Lyons: Can my hon. Friend say by whom they were appointed?

Sir E. Grigg: Perhaps the hon. Member will await the answer to a later question.

Sir Smedley Crooke: asked the Parliamentary Secretary to the Ministry of Information how many persons are employed on the strength of the Ministry; how many were formerly civil servants; how many are officers in the Services; and how many are journalists of repute?

Sir E. Grigg: As regards the first part of the question, I would refer my hon. Friend to the reply which I gave yesterday to the hon. Member for Doncaster (Mr. J. Morgan). The staff at headquarters and in the regional offices of the Ministry includes 388 civil servants, 50 officers of the fighting Services and 43 professional journalists. I should add that nearly half of the total number employed consists of clerical, typing and

messenger grades, and that the News and Censorship Divisions, which account for 433 persons in all, are working on a three-shift basis covering the full 24 hours a day. This of course necessitates a proportionately larger staff.

Sir Joseph Nall: Why does every executive require a typist or a messenger?

Sir E. Grigg: I am not aware that they do.

Sir Francis Fremantle: Can my hon. Friend say whether some of the journalists include those connected with the technical Press, especially the medical Press, who would be of immense value to the Ministry of Information?

Sir E. Grigg: I must ask for notice of that question.

Sir Nairne Stewart Sandeman: Are these civil servants men picked for the job, or are they men who have been handed over from other Departments?

Sir E. Grigg: I stated yesterday that my Noble Friend is investigating the staff of the Ministry. Until that investigation is completed 1 hope the House will allow me to ask them to wait before I answer further questions on that point.

Mr. Naylor: May I ask what these persons are doing with the information they receive?

Sir E. Grigg: I am sure the hon. Member understands that the Ministry of Information can only give out the information which reaches it from the Departments concerned.

Mr. Lyons: asked the Parliamentary Secretary to the Ministry of Information whether he will state the salaries paid to all officers of the Ministry of Information except the permanent Civil Service and clerical staff so employed, in London andthe country; and by what selection board or other means they were respectively appointed?

Sir E. Grigg: As the reply to the first part of the question includes a number of figures I will, with my hon. Friend's permission, circulate it in the Official Report. The appointment of persons designated for the principal posts in the Ministry was approved by my right hon. Friend the Lord Privy Seal. The selection of staff for the remaining posts was


carried out by the nucleus start. In certain cases consultations took place with the Press and the British Council. Certain officers were nominated by other Government Departments as their representatives.

Mr. Lyons: Can the Minister tell me, in relation to the 1,000 persons who are employed in this Department, what is in the main the occupation of those who are not civil servants and what is in the main the occupation of those persons who have been appointed in the provinces, and by whom they have been appointed?

Sir E. Griggs: That is an entirely different question, and perhaps the hon. and learned Member will put it down.

Sir P. Harris: Has any estimate been made of the total monthly cost of this Department?

Sir E. Grigg: I told the House yesterday that my Noble Friend is now going closely into the organisation of this Department. It has been in existence only three weeks.

Following is the information:

(A) Headquarters staff.
£


(1) The general classification (apart from certain posts for which special technical or professional qualifications are required), is as follows:



Salaried officers, Grade I (i.e. Heads of Sections)
1,000


Salaried Officers, Grade II
600–800


Salaried Officers, Grade III—two ranges, depending on age and qualifications
400–500



250–350


Several of the Directors are serving without pay from public fundsThe salaries of the remainder have not yet been fixed. A few officers of the rank of Deputy Director arc receiving salaries up to £1,200. Officers on loan from the British Council are retaining their previous salaries..



(2) The following special rates have been fixed for particular classes:



Censorship Division.



Deputy Chief Censors
740


Censors
635


Assistant Censors
515


Deputy Assistant Censors
395


News Division.



Members of Specialist Sections (corresponding to Press Officers of Government Departments)
650

(B) Regional staff.
£


Chief Regional Information Officers
800–1,000


Publicity and Press Officers
400–500

GERMANY (BRITISH LEAFLETS).

Mr. Cocks: asked the Parliamentary Secretary to the Ministry of Information whether, when preparing for the future dropping of leaflets on German territory, he will consider arranging that some of these leaflets should be written bydistinguished and influential Germans who are at present exiled from their country?

Sir E. Grigg: My Noble Friend has noted the hon. Member's suggestion for consideration.

INSPECTION (MEMBERS OF PARLIAMENT).

Mr. Lyons: asked the Parliamentary Secretary to the Ministry of Information what facilities are available for Members of Parliament to inspect the work of the Ministry of Information at their premises in London and the provinces?

Sir E. Grigg: My Noble Friend will be happy to arrange facilities for any Member of the House to visit and inspect the work of the Ministry of Information either at the headquarters in London or in the regional offices.

Mr. Lyons: Is the application to be made to the hon. Member himself? At present Members of Parliament have no information as to where the Ministry of Information is sitting.

NAZI LEADERS' FORTUNES.

Sir Henry Morris-Jones: asked the Parliamentary Secretary to the Ministry of Information whether he will take steps to make known to the German people the fact that large fortunes have been placed by the Nazi leaders of Germany in foreign countries; and to emphasise the conclusion to be drawn from this practical manifestation of the extent of their confidence in their own future and in the finances of the nationthey control?

Sir E. Grigg: My Noble Friend has read with much interest the American Press reports showing that large fortunes have been placed abroad by certain of the Nazi leaders, and he is taking steps to see that these reports and the implications of the action of the Nazi leaders are brought to the notice of the German people.

Mr. Sorensen: May I ask whether the Minister of Information will make certain that these statements are true?

Sir E. Grigg: This statement, being of great importance, my Noble Friend thought it necessary to make certain close inquiries before they were reproduced. The hon. Member will understand that inquiries of this kind cannot produce evidence of the sort to be publicly given in a court of law.

Mr. McGovern: Is not thisrather a dangerous form of propaganda in which the Germans may also indulge, and tell us where our leaders have their fortunes?

Sir E. Grigg: I am sure that we have nothing to fear from inquiries of that sort.

OLD AGE PENSIONS.

Mr. Tinker: asked the Prime Minister, in view of the fact that the in tended investigation into the position of old age pensioners is postponed for a period, will he consider giving time to the House to discuss what shall be done in the meantime, as there is great feeling throughout the country that the present position of old age pensioners should be reviewed immediately?

The Prime Minister (Mr. Chamberlain): In the circumstances and in view of the full Debate on the subject of old age pensions on 27th July, I do not think that any useful purpose would be served by a further discussion at the present time. I would also refer to the statement I made on the subject on the 13th of this month.

Mr. Tinker: Perhaps the Prime Minister will remember the feelings of the House on this question. Are we not entitled to a discussion in the present circumstances in order to satisfy the House?

PRIME MINISTER'S WEEKLY STATEMENT (PUBLICITY).

Sir George Broadbridge: asked the Prime Minister whether, in view of the advantages that would accrue by broad casting direct from this House his weekly statement on the general situation, he will take steps to make arrangements to this end?

The Prime Minister: No, Sir. I am satisfied that existing arrangements ensure full publicity for such statements made in this House.

LOCATION OF INDUSTRY.

Mr. A. Edwards: asked the Prime Minister whether, as the necessity for evacuation on a large scale emphasises the necessity for the scientific planning of the location of industry, he will call for the immediate publication of an interim report by the Commission studying this subject?

The Prime Minister: I am afraid that in present circumstances the pressure of urgent work more directly connected with the war precludes the printing and publication of a report.

Mr. Edwards: Can the Prime Minister say whether it is not a fact that this report has been held up for a long time owing to a disagreement among the members of the Committee?

The Prime Minister: I am not aware of that.

FOOD SUPPLIES.

FISH DISTRIBUTION.

Mr. Lewis: asked the Chancellor of the Duchy of Lancaster upon whose advice his Department relied when drafting the regulations for the control of the distribution of fish which have done much harm, and which have had to be withdrawn; and if he can assure the House that there is no risk that any further reliance will be placed upon advice from the same quarter?

The Chancellor of the Duchy of Lancaster (Mr. W. S. Morrison): The scheme was framed by the Department after consultation with representatives of the producers and distributors. As regards the second part of the question, I would refer to the reply which I gave to questions on this subject on 20th September.

Mr. Lewis: Is it not a fact that the advisory board met only once, that the scheme was presented to them as a completed scheme, and will my right hon. Friend say who is responsible for the drafting of that completed scheme?

Mr. Morrison: I understand that some consultation did take place, but it was not found possible to get unanimity of opinion in approving the scheme. Everybody who knows the fish trade will be surprised that any degree of unanimity on any point was reached.

Mr. Lipson: When the right hon. Gentleman produces his scheme for food control, will he see that the consumers' point of view is fully considered?

Mr. Morrison: The whole object of food control is to safeguard the interests of the consumer.

Mr. Shinwell: Does the right hon. Gentleman accept full responsibility for the submission of the scheme, and can he say what is the cost?

Mr. Morrison: I am, of course, responsible for these matters. As regards the cost, I could not say what it is without notice.

Sir John Haslam: Will the right hon. Gentleman see that in making all these Orders the retailer, who knows the wishes and desires of the consumers best, is consulted?

Mr. Morrison: I intend to take full advantage of the experience of retailers in these matters.

WHEAT SUPPLIES (MILLERS).

Mr. De la B è re: asked the Chancellor of the Duchy of Lancaster whether the Government will take steps to ensure that an adequate supply of wheat is available for the small millers who, although their capacity may be small, arc entirely dependent on their output for their living?

Mr. W. S. Morrison: All the flour millers are now working under the control of the Ministry of Food. There is an ample supply of wheat for all the mills, and my hon. Friend may rest assured that there will be no difference of treatment as between small and large millers.

Mr. De la B ère: Does the right hon. Gentleman realise that the small miller is a great asset to the country, and does he further realise that the small miller wants protection in war time from the big milling combines just as much as he does in peace time?

HERRING (PRICE).

Mr. Robert Gibson: asked the Chancellor of the Duchy of Lancaster whether he has considered the recommendation of the Clyde Fishermen's Association, passed at the meeting of their executive on 18th September, 1939, that fixed prices for herring be declared meantime at 25s. percran for herring for canning, and 55s.
per cran for all other herring instead of maximum prices, as they fear that with maximum prices they will be exploited; and if he has any statement to make on the subject?

Mr. W. S. Morrison: In fixingprices it is necessary to consider not only the herring fishery of the Clyde, but also of the East Coast where conditions are different. The whole question of the price of herring is under consideration and a decision will be reached as early as possible.

Mr. Gibson: Can the right hon. Gentleman say whether he has received communications from the Clyde area since the date mentioned in the question, and can he say whether the appropriate channel is direct to himself or through the Secretary of State for Scotland?

Mr. Morrison: All questions as to price should be directed to me.

Mr. Loftus: Can the right hon. Gentleman inform the House whether the Herring Board is still functioning, or whether it is suspended?

Mr. Morrison: I should like to have notice of that question. The future of the Herring Board under war conditions is now under consideration, and a statement on that subject will be made very shortly.

Mr. Thorne: Is there any export of fish at the present time?

Mr. Morrison: All I can say is that the export has been greatly reduced.

SUGAR PRICES (SCOTLAND).

Mr. R. Gibson: asked the Chancellor of the Duchy of Lancaster whether he is aware that refineries in Greenock and elsewhere have received instructions not to send less than one ton of sugar, carriage paid, to the nearest station or port, thus causing hardship to retailers in the Highlands and Islands of Scotland who have to take smaller quantities and have to pay freight of 2s. per cwt., or more, plus pier or ferry dues of 6d. or is. in addition to cartage of is. or thereby, but can only charge 3 ¼ d. per lb.; and whether he has any statement to make on the subject?

Mr. W. S. Morrison: No instructions of the kind referred to have been sent by the Ministry of Food to refiners in Scotland and any limitations which may


have been placed upon the despatch of sugar from refineries are due to local transport difficulties. A new Sugar Prices Order was made on 23rd September which raised the maximum price of granulated sugar to 3½d. per 1b. It introduced special arrangements for the trade in the parts of Scotland referred to in the hon. and learned Member's question.

Mr. Gibson: In view of the considerations mentioned in the question will the right hon. Gentleman not consider the advisability of having a fixed price instead of a maximum price?

Mr. Morrison: When the object of food control is achieved there will be an increased number of fixed prices. It does not increase prices themselves, but increases the number of fixed prices.

Mr. Burke: Will the right hon. Gentleman consider giving much wider publicity to the orders issued by his Department? All kinds of people are being told that things are being done under Government control and by Government order, for which in fact the Government are not really responsible?

Mr. Morrison: That probably is the case, and I am considering some method of achieving wider publicity for these orders.

Mr. A. V. Alexander: Is the right hon. Gentleman aware that there is widespread dissatisfaction at the new orderbeing practised of accepting no carriage paid delivery from refineries under two tons, which presses hard on the small man? Is it not the case that the trade recommended a return to a minimum quantity not exceeding 4 cwt.?

Mr. Morrison: I should like notice of that particular point. As I understand it, the trade itself limited the consignment to a certain size because of the transport difficulties they had to encounter.

Mr. Thorne: Is not the best way of dealing with the thousands of people in this country to broadcast these orders?

Mr. Morrison: That is one way of doing it, but I think it will be necessary to use some sort of periodical circulation so that people will know where they are.

TEA CONTRACTS.

Mr. Brooke: asked the Chancellor of the Duchy of Lancaster whether the instructions issued by the Tea Brokers Association of London to its members on 15th September, forbidding them to complete open contracts entered into since 5th June, were issued on his authority; if so, what were the reasons for cancelling the previous instructions that buyers were to be responsible for completing their contracts; and is he aware of the confusion and loss occasioned to the trade?

Mr. W. S. Morrison: The advice from the Tea Brokers' Association to buyers of tea on 15th September was issued at the request of my Department having regard to the legal position in respect of requisitioned tea arising from the Tea (Control) Order, 1939. The previous advice to buyers to complete their contracts was prompted by a desire within the trade to continue their peace-time custom pending the ascertainment of the principles of compensation for requisitioned tea. I regret that this inconvenience, inseparable from the introduction of control, has been caused to the trade.

Mr. Brooke: May I ask whether it is the right hon. Gentleman's desire to make full use of the excellent normal machinery of the trade with as little interference as possible, consistently with securing the objects of the Government scheme?

Mr. Morrison: Yes, Sir, that is so.

AUXILIARY FORCES (WOMEN).

Mrs. Adamson: asked the Chancellor of the Duchy of Lancaster whether he can give an assurance that women under the age of 20 years in the various auxiliary armed forces will not be sent overseas for duties?

Mr. W. S. Morrison: Medical and other factors, including that of age, will, of course, be given full weight when any question of the service overseas of women in the auxiliary forces is under consideration.

EDUCATION.

EVACUATED AREAS.

Sir Assheton Pownall: asked the Parliamentary Secretary to the Board of Education what action is being taken


with regard to the education of those children whose parents refused to have them evacuated or who have since returned to London?

The Parliamentary Secretary to the Board of Education (Mr. Kenneth Lindsay): My Noble Friend is fully conscious of the disadvantages resulting from the absence of education, medical services and the provision of organised games and recreation for children remaining in evacuation areas, and he hopes, at an early date, to issue a circular suggesting expedients for dealing with these matters.

Sir J. Nall: Is it not desirable that some provision should be made immediately for the education of these children?

Mr. Lindsay: That is precisely why the circular is being issued.

EVACUEE CHILDREN (COST).

Mr. Hopkin: asked the Parliamentary Secretary to the Board of Education what will be the basis upon which the cost of the education of unofficial evacuee children who are in attendance at public elementary schools and secondary schools shall be met, as between the local education authorities of the evacuating and receiving areas; and has he prepared a general scheme, or is it proposed that this settlement be arranged by mutual agreement between the two local education authorities concerned?

Mr. Lindsay: The arrangements made by the Board with regard to the incidence of cost of the education of evacuated children relate solely to children evacuated under the Government scheme. In the case of children transferred from one area to another otherwise than under that scheme, the duty of providing elementary education falls on the authority of the area to which they are transferred. The position in regard to secondary school children must be left to settlement by the authorities concerned, in the light of the circumstances of each case.

Mr. A. Reed: Is the hon. Gentleman aware that in some places these unofficial evacuees amount to something like 40 per cent. of the total of evacuated children, and that these children come down with their parents destitute and have to be relieved, and is it fair that these authorities should have to pay the total cost of their education?

Mr. Lindsay: I am aware that in some areas there is a very heavy increase.

Mr. Lipson: MayI ask whether the attendance of unofficial evacuated children will not rank for grant for the benefit of the authority into whose area they go?

Mr. Lindsay: Yes, their attendance will rank for grant.

Sir J. Nall: Is the Department considering the necessity of requiring the evacuating authorities to reimburse the reception authorities, and does my hon. Friend realise that these reception authorities cannot bear the additional expense?

Mr. Lindsay: I am aware of that.

Mr. A. Reed: Can the hon. Gentleman reconsider this question, which is of great importance.

WAR RISKS INSURANCE.

Mr. Hall-Caine: asked the President of the Board of Trade the nature of the advantages under the War Risks Insurance Act enjoyed by those firms which registered before the outbreakof war, compared with those who applied for insurance after the outbreak of war; and whether, if there is no advantage, he will consider refunding the registration fee?

The Parliamentary Secretary to the Board of Trade (Major Lloyd George): As was explained by my right hon. Friend on the Second Reading of the War Risks Insurance Bill, the advantage of registration before the emergency occurred was the security that there would be no gap between the occurrence of the emergency and the full cover for insurance. It is true that, owing to the sudden outbreak of war during the early days of the operation of the registration scheme, it became necessary in the national interest to confer an equivalent advantage on persons who had not registered, but I would pointout that this did not diminish the work incidental to the work of actual registration in respect of which the fees were charged. The registration fees were very small and represented no more than the cost of the services rendered, and my right hon. Friendhas no power to return them.

Mr. Hall-Caine: asked the President of the Board of Trade the number of cases in which firms have not yet regis-


tered under the War Risks Insurance Act since the outbreak of war; in how many cases action has been or is being taken against them under the provisions of the Act; whether he is aware of the seriousness of discrimination in view of the fact that a firm which registered has to pay full premium on the value of their stock at the outbreak of war, whereas firms which did not register can remove 'their stock to the Isle of Man and the Channel Islands and then not insure at all; and whether he can make a full statement on the operation of this Measure?

Major Lloyd George: Detailed information as to the number of firms which registered under the peace-time scheme and have so far insured under the commodity insurance scheme is not at present available. The Board of Trade have refrained in the early weeks of war, and while important modifications of the insurance scheme are being made or considered, from taking action against firms for non-compliance with the compulsory insurance provisions, but I cannot undertake that this forbearance will continue indefinitely. I do not accept my hon. Friend's suggestion that there is, or has been, any discrimination. Arrangements have been made for the premiums to be adjusted so that traders will not be required to pay a premium on amounts greater than the value of the stocks actually held from time to time during the period of insurance, and premiums are not payable in respect of goods which are not situated in the United Kingdom whether they are owned by persons who have registered or not. My right hon. Friend has already announced his readiness to consider representations from responsible bodies in regard to the operation of the scheme, and in response to such representations a number of exclusions of goods on the ground of indestructibility or unsaleability have already been announced. Other representations are still under consideration.

Mr. Poole: May I respectfully and humbly ask the hon. and gallant Gentleman whether he is aware that he has already fallen into the very bad habit of reading his answers to questions so rapidly that it is impossible to follow them on this side of the House, and nor do I imagine that they can be taken down in another part of the House.

Mr. Mander: Will the hon. and gallant Gentleman bear in mind that the exclusion of certain trades from this scheme has made it all the worse for those who remain, and will he not abandon the whole scheme?

CLOSED POST OFFICES, LONDON.

Mr. Lewis: asked the Postmaster- General the reason for which so many post offices in London have been closed to the public, and when it is proposed to re-open them?

The Assistant Postmaster-General (Mr. Mabane): Fourty-four branch post offices were closed at the outbreak of war as a very large number of the staff were called to the Colours and also for structural alterations. Seventeen have already been reopened and it is hoped to reopen the bulk of the remainder in a few weeks.

PITHEAD BATHS.

Mr. Daggar: asked the Secretary for Mines whether it is proposed to continue the practice of constructing pithead baths, and, if so, can he state the date on which it is contemplated to commence the construction of a pithead bath at the South Celynen Colliery, Newbridge, Monmouthshire, as the ballot taken by the workmen before the commencement of such a scheme was held five years ago?

The Secretary for Mines (Mr. Geoffrey Lloyd): The Miners'Welfare Committee propose to continue building pithead baths so far as conditions in the building and engineering trades permit, but the future is not at present sufficiently certain to enable the committee to give a date for commencing an installation at South Celynen Colliery.

ARMY OFFICERS' UNIFORMS.

Captain Alan Graham: asked the Secretary of State for War whether, in order to avoid injustice to those tailors who do not belong to the National Federation of Merchant Tailors, he will take measures to acquaint officers who receive His Majesty's commission that they are free to get their uniforms made by tailors other than those on the recommended list should they so desire?

The Financial Secretary to the War Office (Sir Victor Warrender): My hon.and gallant Friend has in mind, no doubt, the pamphlet which has been circulated giving a list of tailors, belonging to the National Federation of Merchant Tailors and other similar organisations, who are prepared to supply uniform to officers at agreed prices. It is clearly stated in this pamphlet that officers have complete freedom of action regarding the source from which they obtain any uniform required, and an instruction to the same effect has recently been issued to all Commands and colonels of regiments.

CROSSWORD PUZZLES(DOMINIONS).

Mr. Storey: asked the Secretary of State for War why the War Office refused to allow the transmission by a reputable news agency in this country to news papers in the Dominions of crossword puzzles which had been submitted to and passed by the Ministry of Information censorship?

Sir V. Warrender: I cannot find that any such action was taken by the War Office.

Mr. Storey: If I send my hon. Friend full details, will he look into the matter?

Sir V. Warrender: Certainly.

INDIAN NATIONAL CONGRESS (STATEMENT OF POLICY).

Mr. Sorensen: asked the Under secretary of State for India whether he is aware of the statement of policy issued officially by the Working Committee of the Indian National Congress and in particular the paragraph therein dealing with war aims; and what action His Majesty's Government intends to take in the matter?

The Under-Secretary of State for India (Sir Hugh O'Neill): The answer to the first part of the question is in the affirmative. The matter is under the Governor-General's consideration and I am not in a position to make any statement at present.

Mr. Sorensen: In view of the very great importanceof this question, may we

expect a statement from the Government at an early date?

Sir H. O'Neill: I am sure a statement will be made at the earliest possible date.

LOCAL GOVERNMENT ELECTIONS.

Mr. Emery: asked the Home Secretary whether he can make a statement as to the policy of the Government in relation to local government elections during the war?

Sir J. Anderson: His Majesty's Government consider that local government elections should be suspended until hostilities are over and an early opportunity will be taken of submitting the necessary legislation to Parliament.

Mr. Mander: Will the right hon. Gentleman bear in mind the possibility of dealing with this matter on the same lines as Parliamentary by-elections, that is, to have no contests by consent, and thus obviate the necessity for any legislation?

Sir J. Anderson: I do not think the matter is quite as simple as that. There is a useful precedent from the last war.

Mr. Maxton: Will the right hon. Gentleman inform the House when there was agreement by all sections of this House that Parliamentary elections should be suspended?

Sir J. Nall: Will this legislation be introduced before the borough elections in November?

Sir J. Anderson: That will be necessary, if it is to serve its purpose.

NORTH SEA ACTION.

Mr. Alexander: (by Private Notice) asked the First Lord of the Admiralty whether he can make any statement on the German wireless report that German aircraft attacked and bombarded a British battleship and aircraft carrier and cruisers and destroyers in the middle of the North Sea; and whether there is any truth in the statement of the German High Command that the aircraft carrier was destroyed and the British battleship badly damaged, and that the German aeroplanes returned to their base without loss?

Mr. Churchill: I am obliged to my right hon. Friend for putting this question. The Commander-in-Chief of the Home Fleet, Sir Charles Forbes, has wirelessed as follows:
Yesterday afternoon in the middle of the North Sea a squadron of British capital ships together with an aircraft carrier, cruisers and destroyers were attacked by about 20 German aircraft. No British ship was hit and no British casualties were incurred. One German flying boat was shot down and another is reported to be badly damaged.

Mr. Alexander: May I ask the First Lord whether he is aware that, although we are amused we arealso gratified at the facts given in his reply to my question; and that we also hope that the public who may, perchance, listen in to the English broadcast from Germany will take this as an example of the veracity of the statements made in those broadcasts?

Mr. Churchill: I might have added that another German aircraft came down in the North Sea. We sent out a destroyer to collect her, and her crew of four are being brought in as prisoners.

Mr. Bellenger: May I ask the First Lord whether this was the earliest available opportunity at which he could divulge this information to the public?

Mr. Churchill: I learned about it about three-quarters of an hour ago, and I thought that the House should know of it.

GREAT BRITAIN AND EIRE.

Mr. Attlee: (by Private Notice) asked the Secretary of State for Dominion Affairs whether any arrangements have been made for closer contact with the Government of Eire at the present time?

The Secretary of State for Dominion Affairs (Mr. Eden): Yes, Sir. In view of the special problems arising out of the war situation in regard to their mutual trade, economic and political relations, the Government of the United Kingdom and the Government of Eire have agreed that the existing system of communication between them should be supplementedby the appointment of a United Kingdom representative to Eire. Sir John Maffey has been appointed to this post and will take up his duties in Dublin forthwith.

BUSINESS OF THE HOUSE.

Ordered,
 That the Proceedings of the Committee of Ways and Means be exempted, at this day's Sitting, from the provisions of the Standing Order (Sittings of the House)."—[The Prime Minister.]

REVISED FINANCIAL STATEMENT(1939–40).

Copy ordered,
 of Revised Estimates of Revenue and Expenditure for the year 1939–40."—[Captain Crookshank.]

Copy presented accordingly; to lie upon the Table, and to be printed. [No. 177.]

Orders of the Day — WAYS AND MEANS.

Considered in Committee.

[Sir DENNIS HERBERT in the Chair.]

Orders of the Day — WAR BUDGET.

3.51 p.m.

The Chancellor of the Exchequer (Sir John Simon): When I opened my Budget at the end of April the estimated expenditure of the year for which I had to provide amounted to £1,322,000,000. The Defence expenditure included in that vast total was at the time taken as £630,000,000. That, therefore, was the total which we had to face in April. The Budget proposals were calculated to raise from revenue £942,000,000, and consequently at that time £380,000,000 was left to be borrowed within the financial year. That was in April. Before the Finance Act was passed, towards the close of July, the figures for this year's expenditure on Defence, owing to acceleration and further plans, had grown to at least a total of £730,000,000, and, consequently, if the revenue contribution remained unaltered, the amount to be borrowed at that time, at the end of July, came out at something like £480,000,000. I remember that I said at the time, on the Third Reading of the Finance Bill, that as things stood the amount of borrowing that would be involved by way of supplement to what was being raised by taxes would not fall far short of £500,000,000. As the Committee will see from the White Paper which will be available when I sit down, those figures at thattime were almost exactly right. The total expenditure authorised when Parliament rose in August was £1,453,000,000, of which £502,000,000 was to be borrowed. Those totals, vast as they are, were, of course, arrived at on the basis that whilewe were forced to undertake increasing Defence expenditure for the protection of the country, we remained at peace throughout the year. But on 3rd September we found ourselves at war, and a Vote of Credit, as the Committee will remember, for an additional £500,000,000 was promptly proposed and adopted. I must tell the Committee that I cannot guarantee that this first Vote of Credit will be sufficient to cover all our requirements up to 31st March next, but

even if it is, the need for a further Budget as promptly as possible is self-evident, since we shall be facing, in this financial year, a total outlay of nearly £2,000,000,000. On the other hand, the original estimate of revenue from existing taxes, which, as I reminded the Committee, was £943,000,000 and which was, up to the time of the outbreak of war, giving every sign of being realised and indeed exceeded, must now be revised. In the new conditions, as hon. Members will readily see, this revenue is likely to be reduced, and,from the figures with which I am furnished, the yield from existing taxes is not likely to exceed £890,000,000. Those are the main figures which form the framework of any budgetary proposals that I have to make this afternoon.
War makes inroads into our finances and consumes our resources in a way which far exceeds even the most elaborate and costly programme of Defence carried out in time of peace. Not only does it upset peace-time estimates of what taxes will produce, and completely alter the scales in which national effort and national sacrifice must be measured, but a great war in which this country is engaged sets for us a special economic problem of immense urgency and gravity which I will try briefly to define. If this problem is not promptlyfaced, if it is not boldly handled, then our power to carry the war through to a victorious conclusion is very gravely weakened and the damage that may be done to our national life after the war is won, may be irreparable. As I have said, nothing, of course, can prevent war waged on the frightful scale of destructiveness which modern war involves from being the most potent instrument for the destruction of human wealth—[An HON. MEMBER: "And life "]—that can be conceived—and life, but for the moment we are looking at the financial side. Finance, as has been sometimes said, is the fourth arm of Defence, no less important than the other three, for if finance failed, then the prop that sustains the whole of our war effort would collapse.
What we have to do, therefore, in this essential department of our national effort is to deal with the economic and financial problem of war in the way which will make the best use of our productive resources. There are two obvious ways, both of which have to be examined.
There is taxation, and there is borrowing, and no doubt we shall have recourse to both. The Exchequer will need money on an unprecedented scale, and to that vast need over the period of the war as a whole, whatever that period may be, taxation will have to make its maximum contribution. But, on the other hand, it is obviously impossible that the whole of our expenditure in a war like this should be provided from the proceeds of taxation, and the Committee will, of course, have anticipated that it will be necessary to supplement that provision from revenue by National Defence loans on a large scale.

Mr. Gallacher: Why not take the money?

Sir J. Simon: It follows—I am addressing the Committee, but in a sense, I am also addressing the outside public generally—that the payment of taxes, even heavily increased taxes, will not exhaust the duty of the private citizen. It will also be his duty to contribute to the greatest extent possible to these loans when they are announced, and all the more so for this reason: Let us always remember, in all the efforts we have to make on the financial side of this war, that except in so far as war is financed either out of the proceeds of taxation or from the proceeds of loans which come from thegenuine savings of the nation, it can only be financed by methods or out of sources which are essentially inflationary. That, all will agree, is a course which we must strive by all means in our power to avoid. Inflation leads, as is well known, to a general increase in price level, and, what is worse, it leads to disparities which in the long run, and may be even in the short run, create great hardships and inequalities which any Government must do its utmost to try to avoid.
As regards borrowing, the time has not yet come for the issue of new National Loans, but I wish to make a brief statement of a general kind about it. When that time does come it will be found that various types of loans will be offered, appropriate for great institutions, for institutions of whatever size, and others appropriate for individuals of whatever means, small or great; and here and now I would wish most earnestly to appeal to all citizens and institutions in the country
to refrain from unnecessary capital expenditure, and to put by whatever savings they can make with a view to devoting them, when the new loans are issued, to the prosecution of the war for the benefit both of the nation and of themselves.
This economic problem of war has another aspect and I venture to dwell on it a moment before I come to what may prove to be the less pleasant but more precise parts of my speech. The economic problem of war, as I said, has another aspect. War enormously expands the Government's demands on industry— enormously. TheGovernment, therefore, must secure a corresponding reduction in civilian demands on industry. If it does not, then the Government and civilian demands compete against one another, jostle against one another for labour, equipment, material, freight space and everything else. It is quite true that under the stress and intensity of national effort industrial production can be increased; it must be increased, for example by the increased use of woman labour, and in other ways. But even after you have allowed for that you must set against it a further fact, that war conditions take away from industry a material proportion of man-power. Broadly speaking the situation that will arise, if prompt and adequate steps are not taken to meet it is that the civilian demand, unless restricted, competing with an immensely increased Government demand, brings about a competitive scramble in which prices rise and the value of money falls. It follows therefore, I think, that it is the first duty of the Chancellor of the Exchequer to use the instrument for which he is specially responsible to help to curtail civilian demand and to make sure that civilian expenditure is directed as far as may be into proper channels. Prohibitions directed against wasteful or unnecessary use of resources, restrictions which limit the consumption of a long list of articles, the strictest economy all along the line, all these things are most valuable, and indeed essential, and I shall have something further to say about economy and waste before I sit down.
Apart from Government demands for armaments and the like there are two other branches of activity which in war time have a first call on our national resources. There is the need to increase the production of food from our


own soil, and we mustlikewise throughout the war bend our energies to the uttermost to promote our export trade. The maintenance and extension of our export trade is, as all hon. Members know, vital to the successful prosecution of the war in order that we may earn the meansto purchase across the seas those essential materials, and goods, including foodstuffs, which we cannot produce or make ourselves. The Government intend to do all that they can, consistently with over-riding war needs, to enable traders to fulfil export orders and to ensure that this country's export capacity is used to the best advantage.
But the business of to-day is to propose additional taxation, both because we must gather in by this means the largest possible amount to help war expenditure, and because this course helps to secure that the spending power in the hands of individuals is not used for unhelpful purposes. The Committee will see, therefore, that the emergency Budget which I now have to open and present must call for severe sacrifices and will make heavy additional demands.

Orders of the Day — INCOME TAX.

First I take Income Tax. In my Budget of last April I resolved not 1o propose a further increase, and the standard rate for this year is therefore at present 5s. 6d. High as that rate is, it must in the circumstances of the war be substantially increased, The Committee will of course bear in mind, though perhaps not every one outside has it so clearly before them, that while we speak of a standard rate of tax, 5s. 6d. or whatever it may be, the real effect of ourIncome Tax code, with its allowances end abatements at the lower end of the scale and the superimposition of rising Surtax at the other end—the real effect of our Income Tax code is to make the actual rate of charge on total income of different sizes mount in a steadily ascending curve which starts from zero at the bottom and reaches really dizzy altitudes at the top. What I have to do is to propose to the Committee a new curve which will secure increasing contributions from direct taxation all along the line. In endeavouring to discharge this task and, indeed, in preparing my fiscal proposals as a whole, there are certain special considerations which I have had in mind and which I should like to set before the Committee

The first is this. We are already almost half way through the present financial year—there are only about six months to go—but I have not limited myself simply to making a plan for the next six months. We shall, of course, have a further Budget at the ordinary time next spring, but it is as well at the beginning of this critical period to set standards and levels with an eye to their continuance, subject, of course, to necessary revision, in the following financial year. If we are preparing to face the possibilityof a three years war in other ways, we must make our plans with this in mind in the fiscal sphere also. My object, therefore, is to put before the Committee a whole scheme, though some parts of it, for reasons which I will state, cannot be completely applied till next year. Some of the additional taxes, at any rate, cannot produce their complete effect in the six months that remain. We shall only secure a full result later.

There is this further consideration. Even though we make up our minds to stiff extra taxation-and we must—the passage from existing levels of taxation, which are already pretty high, to the higher levels which war makes necessary, cannot in all cases be made in a single bound but needs to be stepped or graded. For example—and here I am anticipating what I am going to explain in detail—the increase which I contemplate in the rate of Income Tax cannot have full effect in the present year, and in the same way the reduction which I feel it my duty to propose in the existing allowances cannot be made operative in time for the collection of the tax due on 1st January. There is another consideration very present to my mind which I am sure has also been the subject of reflection by many hon. Members. There are a good many cases just at present where the dislocation that has been caused by the outbreak of war is resulting in a severe drop of the actual income. earned by individual taxpayers in the present year. Since our Income Tax system, as far as direct assessment on earned income is concerned— Schedules D and E—is based on the idea that you treat a man as having an income which last year shows him to have then enjoyed, it is very important to make a special provision, especially when the tax is raised substantially, which will meet that difficulty. I am going to attempt to do that. I have spoken enough in


generalities, but these considerations really have their justification and govern and inspire the whole plan.

The plan I put forward is that in a full year the standard rate of Income Tax should be 7s. 6d. in the £. This, of course, must be subject to reconsideration when the time comes, but that is the basis on which I have attempted to construct my Income Tax scheme. In the present year, which is already half-way through, I propose, for the reasons I have stated, that the standard rate should be 7s. This rate may be regarded as a composite rate made up, as it were, of the 5s. 6d. for the first quarter of the year and 7s. 6d. for the other three-quarters. I should be glad if the necessary arithmetical calculation for a few moments will relieve Members of the severe anxiety they may entertain. The Income Tax due by direct assessment on 1st January next will be made out at the 7s. rate. Similarly, in the case of any payments such as dividends, interest, etc., which are liable for tax in the present financial year, the rate of 7s. will be substituted for 5s. 6d. throughout. Of course, there will be adjustments arising from the allowances and reliefs.

I mentioned just now—and I noted that there were indications in the Committee that the observation was approved—that I have by no means overlooked the great practical difficulties that will face many people in view of their immediate drop in income if this higher rate were charged automatically on what I may call their conventional or statutory income, that is, the figure that was arrived at of what they earned last year. Therefore, I am making special provision to mitigate the severity of this increase of tax in the case where an individual is this year experiencing a substantial drop of earned income. I say "substantial" because it would be a pity to disturb the whole arrangement for a comparatively small difference. Provision will be made to the effect that where such an individual proves that his directly assessed income this year is reduced by circumstances connected with the war below the figure of his assessment based on last year's income by as much as 20 per cent., he shall be entitled to substitute this year's actual income for last year's income as the basis on which he is assessed. The

Committee will see the great importance of that provision in the case of all those who find themselves suddenly with a greatly reduced income.

I will give an example, a moderate one, but enough to explain beyond question what I mean. Suppose a man's income from his business or profession or salary is assessed this year as £1,000, because that was the figure which was proper to measure his earnings last year. If in his case the consequence of war conditions is that his actual income this year is seriously reduced, to, say, £700, he will be entitled under my proposal to substitute an assessment based on £700 for the assessment last year, and will pay the 7s. rate, or whatever is the appropriate rate after making abatements and allowances: but he will pay on a smaller figure, because it is the actual figure which represents his present income.

Sir William Davison: Up to what date?

Sir J. Simon: This is just a comparison between the assessment already made for this year, which in practice is based on his last year's earnings, and the figure which is shown to the authorities to be the appropriate figure for this year [Hon. Members: "Which year? '] The present fiscal year. I think that probably what my hon. Friend the Member for South Kensington (Sir W. Davison) has in mind is that he wants to be sure that the larger amount will not be demanded before it is possible to prove the figures.

Sir W. Davison: Yes.

Sir J. Simon: No, it will not. Income Tax on earnings is paid in two instalments. In most cases there will not be a question, I should think, about the first instalment, but whether there is or not I intend the arrangement to be suchas to make good the spirit of this proposal. There is a corollary to this which I must mention. It will occur to anybody who thinks out the matter closely. If an individual avails himself of this relief, which I call "specific cause," in the present year, then the amount of tax which he paid last year will be liable to be revised by reference to his actual income last year. As an illustration let us take the case over years 1, 2, 3. Let us assume that we are in year 3. The Income Tax payer comes forward and says,


"The year 3 is a very bad year for me and I really ought not, in the circumstances, to be made to pay in respect of year 3 on my much larger income of the year 2." I say, "Be it so, that is the fair way." But I must also say to him, "If you do that I must be entitled to examine what was the position in the year 2, because you have already paid in the year 2 upon the basis of your income for the year 1"; and if the year 2 was a very prosperous one, with a lean year on either side of it, unless I added that corollary he would escape paying the Income Tax on the good year.

Mr. Silverman: Will there be an option?

Sir J. Simon: Yes, you stay as you are if you like. If the hon. Member takes advantage of my offer, which I think is a very good one, he must not mind if I ask to examine how things stood with him a year ago. Of course I should not charge the new standard rate in respect of the old period. Each year will carry its own appropriate rate. [An Hon. Member: "It is very kind of you."] Anything I can do I shall be very glad to do.
I must now state the reductions in the existing allowances in order that an increased contribution may be secured, as I say, all along the line. In order that the scheme approved by Parliament may be a balanced and complete scheme I propose that these changes should be enacted now in Finance Bill No. 2, though with one exception they will not come into operation until next year. The exception, the change which will operate at once, with the increase of the standard rate to 7s., is that instead of the first £135 of taxable income being charged as it is to-day at is. 8d., the charge will be 2S. 4d., which is one-third of 7s. In the following year, however, we must revert to the fraction of one-half of the standard rate, as was done by Lord Snowden in the crisis Budget of 1931, and, therefore, if the standard rate should then be 7s fid. the half rate would be 3s. 9,d.
But I think that if we do that we should accompany it by another provision which would increase the reduced rate zone, which is now £135 to £165. The result will be to give relief to a certain section which otherwise would come under the full blast of 7s. 6d., I think

unfairly so. I must also ask the Committee to support me in the following changes in allowances at the lower end of the scale. Earned income allowance, which is now one-fifth, with a maximum of £300, will be one-sixth with a maximum of £250. The marriage allowance will be £170 instead of £180, and the allowance for children will be £50 instead of £60. Those changes, as I said, though enacted now, will begin to operate only in respect of the next financial year. Taking these increases of rates and these variations in allowances together, these Income Tax changes (assuming a standard rate of 7s. 6d. in 1940–41) are estimated to produce £70,000,000 this year and £146,000,000 in a full year.

Orders of the Day — SURTAX.

At the other end of the scale comes the Surtax. It must not be forgotten in any quarter of the Committee that the Surtax-payer suffered a 10 per cent. addition to the charge in the crisis Budget of 1931, which has never been removed —

Mr. Ellis Smith: Like the means test.

Sir J. Simon: —and I added a further surcharge to the Surtax this spring. The increase in standard rate for Income Tax —and the Committee appreciate, I think, that I have put up the standard rate very severely—applies, of course, to those who pay Surtax also, but I must in existing circumstances increase the Surtax charge further. I propose that the new Surtax scales should run from Is. 3d. at £2,000 to 9s. 6d. for the slices of income over £30,000. Anybody who can do the arithmetic of adding 9s. 6d. to 7s. 6d. can see the effect which these new scales will have at that level. These new scales will come into force for the Surtax payable on 1st January, 1940. By this means the Surtax will produce another £5,000,000 this year and £8,000,000 in a full year.
It is no good a Chancellor of Exchequer, in face of these fierce increases, spending time expressing sympathy or regret, but I would like to add this, because it has a practical application: I well understand, and every fair-minded man in the Committee ought to understand, how heavy, under these proposals, will be the weight of the Income Tax and Surtax which will fall due to be paid next January. Yet it is of vital importance


that the proceeds of the tax should reach the Exchequer as soon as possible after that date. I am confident that we can rely on the great army of taxpayers to carry us to success in this part of the field just as we rely confidently on the Armed Forces of the Crown in the grimmer struggle which they have to face.

Orders of the Day — ESTATE DUTY

The rates of Estate Duty were also in creased in this year's Finance Act by 10 per cent. on estates exceeding £50,000 in value, with an exception, which the Committee will remember, in regard to the agricultural value of certain estates. I must make a further modification here. I now propose that, in relation to deaths taking place after to-day—

Mr. Gallacher: There will be a lot

Sir J. Simon: It is only-half past four in the afternoon so I have provided a locus penitentiae. After to-day, the duty on estates exceeding £10,000 but not exceeding £50,000 will be increased by 10 per cent. and on estates over £50,000, on which I put 10 per cent. in the spring, the increase will be 20 per cent. instead of 10 per cent. The maximum rate of Estate Duty applicable to the largest estates will thus be 60 per cent. The yield of this further increase is estimated at £6,000,000 in a full year and £1,500,000 in the current year.
I think the Committee has realised this fact: thatthese proposals for increased direct taxation, taken together, represent an unprecedented burden which nothing but the sternest necessity could justify. I take this course because the situation calls for these severe sacrifices, the heaviest yet which the direct taxpayer in this country has ever had to bear, but no more, I believe, than he is prepared to bear as part of a balanced scheme which calls for contributions for war expenditure from citizens of every kind and fortune.
I now turn to indirect taxation. Here, again, I must ask for a very substantial contribution by the increase of certain taxes of Customs and Excise. Before every Budget, suggestions come in from many quarters for devising new imposts, and there are novel proposals which are well worth examination; but taxes which require a new machinery or which assume results which have never been

tested by experience, are not the most suitable for an emergency Budget which has to be constructed in a week or two. Accordingly, without prejudice to these ingenious suggestions for the future, we are relying, on this occasion, on a range of expedients, the working of which is already well known to His Majesty's Customs and Excise.

Orders of the Day — BEER, SPIRITS AND WINE DUTIES.

First, I propose additions to all the taxes on alcoholic liquor—

Viscountess Astor: Hear, hear! At last.

Sir J. Simon: —to take effect as from to-morrow. I must state the details clearly for the benefit of hon. Members generally. On beer, the addition will be 24s. per 36 gallons, which is equivalent to an added Id. a pint. This increased beer duty is estimated to produce £11,000,000 more this year and £27,000,000 more in a full year. Next, the duty on spirits will be increased by 10s. per proof gallon in the basic duty. I may perhaps make it more intelligible if I say that, from inquiries which I have made, I believe that a bottle of whisky now costs 12s. 6d. —

Hon. Members: Thirteen shillings.

Sir J. Simon: I defer to the superior knowledge of hon. Members, but let us make an assumption. It is that, if a bottle of whisky costs 12s. 6d., with the added duty it would cost 13s. 9d. That is estimated to produce £2,000,000 this year and in a full year £3,500,000. In the case of wines there will be an increaseat the rate of 2s. per gallon on imported light wines and British wines, and 4s. per gallon on imported heavy wines. That will produce £1,000,000 this year and, in a full year, about £2,000,000. In connection with imported sparkling wines and spirits, it has been necessary to ask the French Government to agree to a modification of the Anglo-French Trade Treaty of 1934, which binds the duty on champagne and brandy. The French Government have consented, and I should like to express the thanks of His Majesty's Government for their ready concurrence.

Orders of the Day — TOBACCO DUTY.

I rum to tobacco. The basic duty is at present us. 6d. per lb. I raised the duty


to this figure from a previous level of 9s. 6d. in my Budget last April. I now propose a further rise of 2S. per lb. That is 1½d. an ounce, making the basic duty 13s. 6d. per lb. This will, of course, be accompanied by corresponding increases in the other tobacco duties, for instance on cigars. I estimate that this will yield £8,000,000 this year and £16,000,000 in a full year. The Committee will, I hope, agree with me that it is right, when we have to get so much more money, that we should get this extra contribution from tobacco and intoxicating liquor. But if the list of additions to indirect taxation stopped there, those who neither smoke nor drink nor pay Income Tax would be making no special contribution to this emergency Budget. For my part I cannot think that that would be right.

Orders of the Day — SUGAR DUTIES.

I propose, therefore, also to make increases in the Sugar Duties which will be equivalent to Id. a lb. on the fully refined product, with corresponding increases on molasses, glucose and saccharin, to take effect as from 5 o'clock to-day. The yield is estimated at £8,500,000 this year and £18,000,000 in a full year.

Orders of the Day — WAR COSTS AND ECONOMY.

Before I refer to the subjects of a duty on excess profits and capital increases I should like to make a few observations on war costs and economy. It is inevitable, as we all appreciate, that the cost of modern war, as expressed in money, should be fearfully high, but we must not assume that, because the figures that we are facing are so enormous, that is a proof that there has been prodigious squandering and waste. The truth is that the increasing complication and elaboration of machines of war and the mechanisation which accompanies the development of military force, while they greatly increase the power in defence as well as in attack of a military unit, also greatly increase its cost. Without quoting actual figures I should like to give this information to the Committee which is interesting and valuable. I have been looking at figures which show the effort needed to produce, for example, modern type aircraft as compared with that which was required for the production of those types that were being manufactured in the final months of the war of 1914–1918.

It is very relevant to the subject that we are considering now, and the Committee may be interested to have some general indication of the relative effort, and consequently of relative costs. Modern types of aeroplanes are made of metal where they used to be largely made of wood, they are incomparably more complex in design, they demand a far greater range of intricate and costly equipment, and the horse power per type has increased some hundreds per cent. A main result is that the effort, as represented by man-hours, to produce a modern type aeroplane may be as much as ten times greater than was needed to produce a similar type in 1918. Broadly speaking, a modern aircraft costs from three to seven times more than a comparable type in 1918, and, of course, maintenance and replacement costs have increased in proportion.

Similarly, in the case of the Navy, ships of comparable tonnage now cost two or three times as much as they did in 1914, While the maintenance of the much more complicated equipment has added greatly to the recurrent cost. As regards the Army, it is broadly true to say that a division in the field costs nearly twice as much to equip and maintain as a division in the later years of the last war. These considerations go a long way to explain the magnitude of the expenditure, but they also lead to the conclusion that it is more important than ever it was that we shouldget full value for our money, that all expenditure which is wasteful or unnecessary should be avoided, and that these principles should be applied not at the end of the war but at the beginning. I do not feel that I should be at all completing the discharge of my duty as Chancellor of the Exchequer if on this occasion I limited myself to proposing greatly increased burdens to be placed on my fellow-countrymen. It is equally my duty to call for the most determined efforts, alike in public and in private expenditure, to search out for means to avoid wasteful outlay. That is a very different thing from asking everyone to stop spending. Any spending which the private citizen finds himself in existing circumstances able to undertake should be undertaken with a deliberate regard to what is helpful to the community in time of war, and his outlay should not be in the form of luxury or extravagance.

In the various public Departments, and in local authority administration—[Interruption] —it is a general proposition not applied to any particular body—in public expenditure here at the centre, and in local government expenditure too, while we are waging war against the enemy abroad let us also wage war against waste at home. In the field of Government expenditure I have one or two announcements to make. Certain additional measures have been quite recently taken. There are two Departments at least which will clearly have to spend enormous sums: the Air Ministry and the Ministry of Supply, whichfurnishes the Army. In each of these Departments within the last few days, by agreement between the Ministers in charge and myself, a special appointment has been made to the Council of the Department of a highly qualified and experienced business man—in the case of the Air Council it is Sir Harold Howitt, and in the case of the Supply Council Mr. Ashley Cooper— for the express purpose of securing hat all proposals for new expenditure are framed with a strict regard to the necessities of finance, and also that the actual operations of the Department shall be conducted on the most economical basis. If I have only mentioned two of the Services, let me add that no one has shown himself more zealous in endeavouring to promote this principle in his own Department than my right hon. Friend the First Lord of the Admiralty.

In the sphere of civil defence I have one or two observations to make. It is quite essential that the Civil Defence should at all times be ready for action, when required, at the shortest notice. Because we have had an easy and a peaceful time for the last few weeks, it would be a mistake to suppose that we do not need to be ready. At the same time it is the Government's intention, in order to conserve our man-power and to avoid unnecessary expenditure, to take steps to ensure that no more people are employed whole time on Civil Defence services than the needs of the situation in fact require. The Home Secretary, I think, dealt with the matter in a question to-day, and he authorises me to say that he is now giving immediate consideration to this subject in order to secure a review by local authorities of their war establishments in the light of the experience that

has been gained as the result of the mobilisation effected at thebeginning of hostilities. I trust and believe that, with the ready support of public-spirited citizens who are prepared to give part-time service, local authorities will be able to effect reductions in the expenditure of man-power and of money.

Therefore,while nothing must be done which would lessen the efficiency of our Civil Defence, we can assuredly rely in full measure on the public spirit of citizens to continue to take their share as unpaid volunteers in part-time service and so limit the call on others for whole-time duty. In addition, the Treasury is sending special and stringent instructions to all Departments to avoid unnecessary expenditure in every sphere. As regards staff, it is obvious that, with the increase of the Government's activities—for instance, the control of the food supply of the whole country—great increases of staff are needed and justified, but the Government are very much alive to the necessity of watching this development. Any well-supported complaint of waste or unnecessary expenditure will be promptly investigated and dealt with. In this connection, the question of the extension of existing machinery or the institution of new checks will be kept under constant observation.

Sir W. Davison: What about the expenditure on the Ministry of Information?

Sir J. Simon: I am sure it is the feeling of the Committee, it is the feeling of the whole country that we are fully prepared to face the vast expenditure that will be involved in fighting and winning this war as long as every effort is made to eliminate waste and secure full value for what is spent. I should like to tell hon. Members that at the Treasury in these last few weeks I have been receiving every day almost by every post, letters containing a few crumpled £I notes, sometimes a single coin, or packages enclosing a gold chain or a bangle or some small article of personal jewellery—often from very poor people—all of them with the message that they wish their names to be kept secret and that they wish their gifts to be used to meet some portion of the expense of the war. I must say that when I see this tray of modest offerings I do feel most deeply


that the spirit in which these gifts are offered should make every one of us the more determined to ensure that, for every £1 of war expenditure, we get £1 worth of value.

Orders of the Day — EXCESS PROFITS TAX.

There are two more large issues with which I wish to deal. Both were referred to in the statement that the Prime Minister made on 27th April when the House approved the introduction of compulsory military training. The first has to do with excess profits in war time. I would remind the Committee that the Prime Minister in the speech to which I refer, stated our intention to limit the growth of profits of armament firms. That intention was carried out by the Armament Profits Duty in the last Finance Bill. But the Prime Minister went on to say that, if war ever came upon us,
 we intend that a system shall be introduced to deal with all profits arising out of war, and not merely with profits arising out of armaments."—[OFFICIAL REPORT, 27th April, 1939; cols. 1350–51, Vol. 346.]

In fulfilment of that undertaking, I am proposing to introduce an Excess Profits Tax which is modelled on the Armament Profits Duty enacted in the last Finance Bill, and one of the Resolutions to be put from the Chair when I sit down will provide for this Excess Profits Tax. In essence, the system devised for Armament Profits Duty will be applied over the whole field of trade and industry generally, and, in consequence, there will be no further need to deal with armaments profits separately. The proposed Excess Profits Tax will, therefore, be a tax of 60 per cent. on any excess of the profits of any trades or businesses since 31st March last over their profits for a pre-war standard. The pre-war standard will be arrived at by the use of the same alternatives as we adopted in connection with Armament Profits Duty, and in the case of new businesses there will be a standard arrived at on similar lines. I cannot at present estimate—I cannot attempt to estimate—the yield of this taxation. It is unlikely to bring in any considerable revenue in the current year, both because the machinery of assessment and collection will have to get going and because, in the majority of cases, the accounting period for which the tax will be payable will be a period ending at

some date hereafter. Most businesses make up their accounts to the end of the calendar year and in those cases the tax can only be collected after the trading results have been examined and compared with the past results. The National Defence Contribution will remain in operation, but only as an alternative to the Excess Profits Tax, so what is collected from a particular business will, in effect, be whichever of the two taxes is the higher. The remaining matter has to do not with increases of profits, but with additions to the capital wealth of individuals during the war. I should like to quote the Prime Minister's words on 27th April. He said:
It should be remembered that the changes which are induced by war may alter very materially the relative values of property, and that whereas some may be enriched others may be impoverished. It is doubtful whether the matter can be dealt with effectively during the progress of the war until the permanent change in value has been established, but I think it is possible that the subject could best be grappled with by a levy on war time increases of wealth, such as was examined by the Select Committee in 1920 but not at that time proceeded with. I want to say again to the House that we are studying this matter further at the present time, so that we can work out a scheme which can, without delay, be put into operation if ever the occasion should arise.".— [OFFICIAL REPORT, 27th April, 1939; col. 1351, Vol. 346.]

I wish to inform the Committee that this matter is being further studied, in accordance with the Prime Minister's promise. A levy of this kind could not appropriately or usefully be attempted during the progress of the war—the Prime Minister indicated as much. So far as it may be desired, or intended, to pay special attention to accumulations of wealth due to the war, the necessary calculations cannot be made until the end of the war. Apart from that circumstance, if one looks at it practically, delays in calculation, which are very elaborate, delays in assessment, and delays in collection are inevitable under war conditions, and would make anyproject for a levy during the war impracticable. In war-time taxation of income is the practical and effective method of proceeding. If Parliament is resolute, as I invite it to be, in imposing taxation, that fact will powerfully tend to prevent and forestall accumulations of war wealth. The subject—we have been studying it rather closely—involves technical problems in a variety of aspects, and I do not


propose, therefore, to say anything more about it to-day, except to reaffirm the Prime Minister's statement of our intentions.

This emergency Budget will indicate to the Committee, and, I hope, to the country, the gravity of the financial and industrial problems involved in the waging of war. But let us get a few crumbs of comfort by way of comparison. We should bear in mind that, however serious our problem may be, the financial problem which confronts Germany is infinitely greater. Let me just take one illustration before I close. The pound sterling remains, when all is said and done, anaccepted medium of international trade. The pound sterling is available for all proper purposes at the official rate of exchange which is published daily. It is true that a limited number of transactions have taken place in other countries at a somewhat lower rate, but these rates are not a matter of primary importance, and their publication, I think, is perhaps rather misleading. On the other hand—let the Committee observe this—even before the war the official rate for the German mark reallymeant nothing at all. There were over 50 different kinds of marks, each showing a different degree of depreciation, and anyone who possessed a frozen balance in marks was very fortunate if he could realise it at a twentieth part of its official value. Atpresent the German mark has no position as an international currency, and it is likely to lose rapidly its value as an internal currency. The inflationary tendency which has been latent for several years is bound to develop further under war conditions. It is only 16 years ago—some of us remember it—when German currency depreciated in a short period until it needed 1,000,000,000 marks to buy what one mark bought previously, and if, as I believe to be the case, most people in Germany are afraidthat this phenomenon may recur, I cannot myself see any reason to regard their fears as entirely groundless.

I have now to the best of my ability discharged the task which was set for me to-day. I have proposed additions to our resources by further taxation which ought to bring in £107,000,000 this year, and £226,500,000 next year. It is not an enviable task which I have had to

discharge. I have had to propose very heavy increases to the burdens which taxation lays upon our people. I am convinced that my fellow-countrymen will shoulder these burdens in the spirit of which the Prime Minister spoke yesterday from this Box, when he declared that the winning of the war depends upon the determination, courage and endurance of ordinary men and women. If the price of victory be high, it is a price worth paying, for it is the price of liberty and of all that makes life worth living for Europe and for ourselves.

Orders of the Day — CUSTOMS AND EXCISE.

BEER (EXCISE DUTY AND DRAWBACK).

Motion made, and Question proposed,
 That on and after the twenty-eighth day of September, nineteen hundred and thirty-nine—
(a)there shall be charged in respect of beer brewed in the United Kingdom, in lieu of the duty of excise theretofore chargeable in respect thereof, a duty of excise at the following rates—



£
s.
d.


For every 36 gallons of worts of a specific gravity of 1,027 degrees or less
2
8
0


For every 36 gallons of worts of a specific gravity exceeding 1,027 degrees—



For the first 1,027 degrees degrees
2
8
0


For every additional degree in excess of 1,027 degree

2
0


and so in proportion for any less number of gallons;
(b) no rebate shall be allowed from any duty of excise for the time being charge-able in respect of beer to which this Resolution applies;
(c) on the exportation from the United Kingdom as merchandise, or for use as ships' stores, of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that the duty of excise chargeable under this Resolution has been paid, there shall be allowed (in addition to the drawback allowable under Section two of the Finance Act. 1933, but in lieu of any other excise drawback) an excise drawback at the following rates:



£
s.
d


For every 36 gallons of beer of an original gravity of 1,027 degrees of less
2
8
2


For every 36 gallons of beer of an original gravity exceeding 1,027 degrees—



For the first 1,027 degrees
2
8
2


For every additional degree in excess of 1,027 degrees

2
0


and so in proportion for any less number of gallons:


Provided that—
(i) nothing in this Resolution shall apply to beer of any description specified in Sub-section (1) of Section two of the Finance Act, 1930; and
(ii) as respects beer of an original gravity of less than 1,027 degrees, the amount of drawback allowable shall not exceed by more than twopence for every thirty-six gallons the amount of duty which is shown to the satisfaction of the Commissioners of Customs and Excise to have been paid.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

5.8 p.m.

The Chairman: In accordance with the usual course I have put the first Budget Resolution from the Chair. Thereupon, all the Budget proposals are open for debate, but the exact terms of the other Budget Resolutions cannot be known or be in the possession of hon. Members until theyhave been put from the Chair. There have been complaints in the past that some inconvenience has resulted. I, therefore, suggest to the Committee that, if they approve, I should, at the conclusion of the speeches of the Leaders of the two Oppositions, putfrom the Chair all the Budget Resolutions, and that the Committee should pass them with the exception of the last one, which will be left open in the usual way in order to keep the Debate open. I understand that that meets with the approval of the Government and the Leader of the Opposition, and if the Committee generally approves, I shall be glad to adopt that course.

Mr. Pethick-Lawrence: I think your proposal, Sir Dennis, on this occasion would be a very admirable one. There have been occasions in previous practice in this House which have precluded Members of the Committee from discussing Resolutions because they have not seen them, and on this occasion, if the Debate is continued to-day, the Resolution will be in the hands of the Committee, and I think, so far from in any way limiting the Debate, it will make it of larger value because the Committee will be in possession of the facts on this occasion. Therefore, I hope that on all sides of the Committee the procedure which you have suggested will be accepted.

Mr. Tinker: Shall we have an opportunity of being able to raise any points that we desire to raise?

The Chairman: Perhaps the hon. Member did not follow what I said. I said that the last Resolution will be read from the Chair but not put to the Committee to be voted upon. It will be left open as a subject for discussion, and discussions can take place on all the Resolutions which have been formally passed. I take it that the course which I have indicated will be agreeable to the Committee.

Hon. Members: Agreed.

5.11 p.m.

Mr. Attlee: The Chancellor of the Exchequer cannot have thought that the measures he has had to propose are likely to enhance his popularity. He has had a distasteful task. This is the second emergency Budget that I remember. Inevitably my mind goes back to eight years ago, when we had an emergency Budget, caused by what was regarded as a great crisis in finance. That crisis was like a bit of sand to a mountain compared with the crisis that faces us now. I cannot help remembering that the people who then took control have brought us to our present position. There is a touch of poetic justice in that it should be the right hon. Gentleman who has had to place before us the results of the policy for which he was largely responsible.
I do not intend to make a long speech. The general points involved in the Budget will be dealt with by my right hon. Friend the Member for East Edinburgh (Mr. Pethick-Lawrence). I agree with the Chancellor of the Exchequer that he is right in endeavouringto raise these large sums by taxation. There was not much enthusiasm for the raising of the Income Tax. I think he is right to do it. He said that there were two great methods— taxation and borrowing. In essence, they are part of the same process. They are, in essence, a method of deciding how you are going to utilise the resources of this country. The two really big questions which face us at this moment are the production of wealth in the form of goods and services, and its distribution. By no possible procedure can we put off the paying for this war to some future occasion, or make some future generation pay by any amount of borrowing. This war, like the last war, will have to be paid for by the efforts of the men and women of this country at thepresent time. That is the point that lies behind the Budget statement.
Adverting to what the Chancellor of the Exchequer said in the closing half of his speech with regard to the need for economy and the avoidance of waste, there is great waste in employing people improperly and there is even greater waste in not employing them at all. It is no use getting an economy in which you are going to throw people out of the jobs in which they are now unless you have jobs in which to put them. I emphasise that point, because I think the Chancellor of the Exchequer was a little short in regard to the real essentials of the situation. The real position is that we have to contrast ourselves with Germany or any other country. We have to consider the resources of this country. Our resources mainly depend upon our productive capacity and our capacity for rendering services. In addition, we have valuable property in other countries which can be mobilised. I look at this Budget from the point of view as to how far it is going to effect an increase in our wealth and the best use of our wealth. A very heavy Income Tax and a very heavy Super-tax undoubtedly effects some better distribution of our spending power by taking away from those who have a superfluity. On the otherhand, there are taxes imposed in this Budget that are going to take away from people who are not getting enough to-day and who thereby will be weakened. The real thing at the back of this Budget is to emphasise the need of a proper rationing system in this country and the proper utilisation of our resources, so as to keep up the strength of our people, and a proper organisation of the internal economy of the country, so as to have a proper balance between what we need for supporting our fighting forces, for obtaining our raw material, and keeping the country going.
Turning to the proposals of the Budget, I suppose one could expect inevitably a steep rise in Income Tax, although we have to remember that the Income Tax at the beginning of this war was alreadystanding a great deal higher than at the beginning of the last war. We have also to remember that we have an enormous debt hanging over us that was incurred during the last war. That must not occur again. At the end of this war we must not find that the men who have fought and worked are in debt to those who

merely lend to the Government. One of the factors that has disorganised the world since the last war has been the piling up of these immense debts.
With regard to the Income Tax I think there isa certain rightness in some of the adjustments, but I think some are unfortunate. I can see no reason why you should increase the burden on earned income as against unearned income. I think it is undesirable—it is not a very large thing, but it is important—that there should be the change in children's allowances, because at this time, owing to the increase in prices, there is a very heavy burden on those who have children. This is no time in which we want to discourage the having of children in this country, which is one of our problems to-day.
When I turn to indirect taxation, I am not objecting to the taxes on alcholic liquors or even on tobacco. From the national point of view these are luxuries, and it is a reasonable tax; but there is very grave ground for reconsideration of the additional tax on sugar. I do not think you want to see less sugar consumed unless there is a real shortage. I remember the days of my youth when sugar was regarded as rather a luxury, and as such there was a slight Victorian prejudice against it on that ground. Nowadays we are told to give everybody sugar, because it is extremely valuable as a food, and I suggest that anything which would stop the use of sugar is very undesirable. It may have a bad effect in other ways. Take the question of the use of sugar with fruit. We have a tremendous fruit crop this year and I am afraid that a great deal is going to waste.
I would like to relate one thing to the Chancellor of the Exchequer to show the readiness of our people for service. I had a letter the other day from an old age pensioner, an old lady, far up in Yorkshire. She wrote saying that she was very distressed at the danger that much of our fruit crops in Kent would be lost, and although she had never been South inher life she would like to come down and help to gather it. That is a fine spirit. I emphasise that point because it shows that it requires looking at, whether putting an increase on sugar is not unwise, when, as a matter of fact, our supplies of sugar are going to be far better than they were during the last war. It is essential to see that whatever


economies we make are economies which strengthen the country, not weaken it. I emphasise the position in which people of very narrow means are being put by the rise in the cost of living—old age pensioners. If you have this tremendous taxation, if you are going, as I think is perfectly right, by a method of taxation to turn the effective demand for commodities largely into Government hands, you have to see that it does not hit these helpless people.
One word with regard to the levy on wealth. I welcome the suggestion of the taxation of war profits, but the best thing is to have no war profits at all. I recognise that in this war there will be changes of fortunes due to one thing or another, and I gather the suggestion is that there should be some kind of levy at the end of the war in which you would raise a levy from those whose capital wealth had increased during the war period. That makes a certainassumption. It assumes that there is more or less a just distribution of the wealth of this country which is not the case. My objection to a levy on war wealth of one kind or another is that it directs the whole question to the need for a levy on the unequal fortunes of war profiteers, and ignores other profits which are being made.
This is the first official War Budget we have had, although the last two Budgets were war budgets. But we are approaching very great changes in this country, and if this war goes on you are inevitably going to get, if you want to have the national effort at its height, a far greater movement towards equality of fortunes in this country. The taxation which is being put on wealth is something towards that. I agree that without grave dislocation you cannot rush the thing, but I think we shall have to have a clear contemplation that this country is going to get through this war, is going to win, and that it is going to win for the benefit of the whole people, and that never again atthe end of a war are we to find that we have saved the country to find that it belongs to other people.

5.26 p.m.

Sir Archibald Sinclair: First, let me pay a tribute to the Chancellor of the Exchequer for his clear, cogent and revealing statement of the financial situation and of the case for demanding heavy sacrifices from the taxpayer. It was a revealing statement, but there was one

point on which I was waiting for information, but did not receive it, and that was in regard to interest rates which must clearly affect the borrowing policy of the Government. I would ask the Chancellor of the Exchequer to make a statement soon on that subject, and in particular to repudiate at an early stage of these discussions the policy of borrowing at the high rates of interest which prevailed during the last war. This war clearly means that we shall have to shoulder financial burdens of almost incalculable weight. Let there be no mistake about it, we are going to shoulder them, and, to my mind, one of the best services which the Chancellor of the Exchequer has rendered us this afternoon has been to enable us to face the facts clearly, instead of indulging in that muddled, wistful thinking which has been only too prevalent in this country, at any rate since rearmament began, about our financial and economic future.. Now we know where we are, and we are taking bold measures to mobilise our financial and economic resources at. the cost of great sacrifices by the taxpayers of all classes. The Chancellor of the Exchequerhas taken the bull by the horns with a vengeance, but he is right to raise as much money as he can by taxation at the start of the war and to amplify and accelerate the diversion of our resources from the peaceful channels of peace to the mighty conduit pipe of war.
No doubt there are many points on which my hon. Friends and I will wish at later stages to offer suggestions, and possibly criticisms, but I do not want to rush into criticism to-day. I feel that the structure of this Budget is one which deserves our support. It is conceived on bold lines, it calls for a great effort when a great effort is needed from the whole people of this country, and, therefore, my hon. Friends and I propose to defer our criticisms until we have given the statement of the Chancellor of the Exchequer that close study which it undoubtedly deserves.
I should, however, like to express gratification—coupled, in one aspect of the problem, with some slight criticism, but on the whole gratification—at the Chancellor's reference to economy. The right hon. Gentleman rightly said that the principles of economy should be applied at the start of the war rather than


at the finish but my hon. Friends and I have consistently urged that they should have been applied at thebeginning of rearmament rather than at the start of the war and after we have already had some four years of rearmament expenditure. The Chancellor told us that he was already taking some very useful steps to deal with the problems of effecting economy innational expenditure. He told us that in the Air Ministry and in the Ministry of Supply officers had been appointed for the express purpose of scrutinising all proposals for new expenditure and of keeping a check on existing expenditure. He told us what was going to be done to reduce in some measure the cost of Civil Defence, and he told us of Treasury instructions which had been issued to all Departments; but my hon. Friends and I are not yet quite satisfied with that statement, and I revert once more, in a few sentences, to the suggestion which I made when the Chancellor introduced his last Budget six months ago, namely, the need, in order to secure economy and to convince the taxpayer that we are getting 20s. worth of value for every £ of his thatwe are spending, and that all straggling growths of expenditure in Government Departments are being rigorously pruned, for a Committee of this House to be appointed to go into the question of expenditure.
I do not support the suggestion that has been made in some quarters for what is called a Geddes committee, a committee of people outside Parliament—for I think this matter of expenditure is essentially the responsibility of Members of the House—a committee which would deal with large questions of policy, whereas what we want is a committee which would deal with administrative waste. Therefore, I have always been in favour, and I am still in favour, of a House of Commons Committee like the Select Committee on Expenditure which was appointed inthe last war, and of which my hon. Friend the Member for South-West Bethnal Green (Sir P. Harris) was a member, and of the work of which he can speak with personal knowledge. It was a Committee which, by the testimony of Ministers in the Government afterthe war, saved this country millions of pounds. I cannot help thinking that if we had a committee of that sort at work in the early stages

of the war it Would have a real effect in checking the growth of wasteful expenditure, and I hope, incidentally, that it would also do something to stop the increase of well-paid jobs for some young men while others are enduring the dangers and hardships of war without the consolation of the pleasant salaries which are received in some of the Government Departments. I ask the Chancellor of the Exchequer seriously to consider the appointment of a Select Committee on national expenditure, and at the same time I assure him of our support for the main outlines of the Budget, which, severe as it is, does not bring us even within remote range of the limit's of our financial strength, and which the British people will accept, as they will accept further sacrifices when they become necessary, as a means to the victory which they are resolved to obtain. Question put, and agreed to.

BEER (CUSTOMS DUTY AND DRAWBACK).

Resolved.
 That on and after the twenty-eighth day of September, nineteen hundred and thirty-nine—
(a) there shall be charged in respect of beer imported into the United Kingdom (in addition to any duty of customs chargeable in respect thereof under Section two of the Finance Act, 1933. but in lieu of any other duty of customs) a duty of customs at the following rates: —



£
S.
d.


For every 36 gallons, where the worts thereof were. before fermentation, of a specific gravity of 1,027degrees or less—





In the case of beer being an Empire product
2
8
5


In the case of beer not being an Empire product
3
8
5


For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity exceeding1,027 degrees—



In the case of beer being an Empire product—



For the first 1,027 degrees
2
8
5


For every additional degree in excess of 1,027 degrees

2
0


In the case of beer not being an Empire Product—



For the first 1,027 degrees
3
8
5


For every degree in excess of 1,027 degrees

2
0


and so in proportion for any less number of gallons:


(b) no rebate shall be allowed from any duty of customs for the time being charge-able in respect of beer to which this Resolution applies;
(c) on the exportation from the United Kingdom as merchandise, or for use as ships' stores, of beer in respect of which it is shown to the satisfaction of the Commissioners of Customs and Excise that the duty of customs chargeable under this Resolution has been paid, there shall be allowed (in addition to the drawback allowable under Section two of the Finance Act, 3933, but in lieu of any other customs drawback) a customs drawback at the following rates:—



£
s.
d.


For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity of 1,027 degrees or less—





In the case of beer being an Empire product
2
8
2


In the case of beer not being an Empire product
3
8
2


For every 36 gallons, where the worts thereof were, before fermentation, of a specific gravity exceeding 1,027 degrees—


In the case of beer being an Empire product—


For the first 1,027 degrees
2
8
2


For every additional degree in excess of 1,027 degrees

2
0


In the case of beer not being an Empire product—


For the first 1,027 degrees
3
8
2


For every degree in excess of 1,027 degrees

2
0


and so in proportion for any less number of gallons:
Provided that—
(i) nothing in this Resolution shall apply to beer of any description specified in Sub-

TABLE


1.
2.
3.


Description of Spirits.
Preferential Rates.
Full Rates.


In cask.
In bottle.
In cask.
In bottle.


For every gallon computed at proof of—
£
s.
d.
£
s.
d.
£
s.
d.
£
s
d.


Brandy or rum
…
…
…
4
2
10
4
3
10
4
5
4
4
6
4


Imitation rum or geneva
…
…
4
2
11
4
3
11
4
5
5
4
6
5


Unsweetened spirits other than those already enumerated
…
…
…
4
2
11
4
2
11
4
5
5
4
5
5


For every gallon of perfumed spirits
…
6
12
0
6
13
0
6
16
0
6
17
0


For every gallon of liqueurs, cordials, mixtures and other preparations in bottle entered in such manner as to indicate that the strength is not to be tested
…
…
…
…
…
—
5
12
7
—
5
15
11


For every gallon computed at proof of spirits of any description not heretofore mentioned, including naphtha and methylic alcohol purified so as to be potable, and mixtures and preparations containing spirit
…
…
…
…
4
2
11
4
3
11
4
5
5
4
6
5

section (1) of Section two of the Finance Act, 1930; and

(ii) as respects beer of an original gravity of less than 1,027 degrees the amount of drawback allowable shall not exceed the amount of duty which is shown to the satisfaction of the Commissioners of Customs and Excise to have been paid, less three pence for every thirty-six gallons.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

SPIRITS (EXCISE DUTY).

Resolved,

That on and after the twenty-eighth day of September, nineteen hundred and thirty-nine, the rate of the duty of excise charged on spirits by Sub-section (2) of Section three of the Finance Act, 1920, in addition to the duties specified in Part III of the First Schedule to that Act shall be increased to four pounds, two shillings and sixpence.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

SPIRITS (CUSTOMS DUTY).

Motion made, and Question proposed,
That on and after the twenty-eighth day of September, nineteen hundred and thirty-nine, the duties of customs charged on spirits of the descriptions set out in the first column of the following Table by Sub-section (1) of Section three of the Finance Act, 1920, in addition to the duties specified in Part II of the First Schedule to that Act shall—
(a) in the case of spirits being Empire products, be charged at the increased rates shown in the second column of that Table; and
(b) in the case of spirits not being Empire products, be charged at the increased rates shown in the third column of that Table.


And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Mr. E. Smith: Before this Resolution is put, Sir Dennis, I wish to ask for your guidance. There is a growing interest in industry about the need of the nation to provide itself with alternative supplies of fuel owing to the rationing of petrol, as a result of which rationing, a large amount of transport has been taken off the roads. There is a growing demand that the Government should encourage alternative supplies and this would mean that certain taxation would have to be reduced, such as the taxation on crude oil and other fuel used for Diesel engines and other forms of motive power. Will it be possible, during to-morrow and Friday, to raise that issue if we part with this Resolution now?

The Chairman: I was about to interrupt the hon. Member and I am glad that he put his point at last. It would be inconvenient, under the course which the Committee has assented to, for hon. Members to discuss these Resolutions separately now. The last Resolution to be read from the Chair will not be put to be voted upon, until the whole Debate has been completed, and in the course of the Debate on that last Resolution, all matters which are in order on any of the Budget Resolutions will, according to custom, be open to debate.

Question put, and agreed to.

WINES (CUSTOMS DUTY).

Resolved,
That, on and after the twenty-eighth day of September, nineteen hundred and thirty-nine, in lieu of the duties of customs theretofore chargeable on wines, there shall be charged the following duties of customs on wines imported into the United Kingdom, that is to say—
(a)in the case of wines of the descriptions specified in the first column of Part I of the following Table and not being Empire pro ducts, duties at the rates respectively specified in the second column of that Part of that Table;
(b)in the case of wine not exceeding twenty-seven degrees of proof spirit and being an Empire product, a duty at a rate representing the full rate of duty for the time being chargeable on wine not exceeding twenty-five degrees of proof spirit and not being an Empire product, reduced by two shillings per gallon; and
(c)in the case of wines of the descriptions specified in the. first column of Part II

of the following Table and being Empire products, duties at the rates respectively specified in the second column of that Part of that Table:
Provided that the provisos to Section three of the Ottawa Agreements Act, 1932 (which provide for an increase in the rate of duty chargeable on wine of the description mentioned in paragraph (b) of this Resolution) shall have effect as if for any reference to paragraph (b) of that Section there were substituted a reference to paragraph (b) of this Resolution.

TABLE.


Part I.


Description of Wine
Rate of Duty per gallon



s.
d.


Not exceeding 25 degrees proof spirit
6
0


Exceeding 25 degrees proof spirit and not exceeding 42 degrees proof spirit
12
0


For every degree or fraction of a degree above 42 degrees proof spirit, an additional duty
1
0


Sparkling, an additional duty
12
6


Still, in bottle, an additional duty
2
0


Part II.


Exceeding 27 degrees proof spirit and not exceeding 42 degrees proof spirit
8
0


For every degree or fraction of adegree above 42 degrees proof spirit an additional duty
0
8


Sparkling, an additional duty
6
3


Still, in bottle, an additional duty
1
0

And it is hereby declared that it is expedient in the public interest that this Re- solution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

SWEETS (EXCISE DUTY).

Resolved,
That on and after the twenty-eighth day of September, nineteen hundred and thirty-nine, the rate of the duty of excise on sweets shall be increased from seven shillings and sixpence to nine shillings and sixpence per gallon in the case of sparkling sweets, and from one shilling and sixpence to three shillings and sixpence per gallon in the case of other sweets.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

TOBACCO (CUSTOMS DUTY).

Resolved,
That on and after the twenty-eighth day of September, nineteen hundred and thirty-nine, in lieu of the full duties of customs theretofore chargeable on tobacco imported into the United Kingdom, there shall be charged on tobacco so imported of the descriptions set out in the first column of the following Table duties of customs at the rates respectively specified in the second column of that Table:

TABLE


Description of tobacco.
Rate of duty per pound.



s.
d.


Tobacco unmanufactured—



containing less than 10 lbs. of moisture in every too lbs. weight thereof—



unstripped
13
6


stripped
13
6½


moisture in every 100 lbs. weight thereof—



unstripped
14
6½


stripped
14
6½


Tobacco manufactured, namely—




Cigars
22
1


Cigarettes
18
7


Cavendish or Negrohead
17
9


Cavendish or Negrohead manufactured in bond

16
0


Other manufactured tobacco
16
0


Snuff—



containing more than 13 lbs. of moisture in every 100 lbs. weight thereof
15
4


containing not more than 13 lbs. of moisture in every 100 lbs. weight thereof
17
9

and so in proportion for any less quantity.
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

TOBACCO (EXCISE DUTY).

Resolved,
That on and after the twenty-eighth day of September, nineteen hundred and thirty-nine, in lieu of the duties of excise theretofore chargeable on tobacco grown in the United Kingdom, there shall be charged on tobacco so grown of the descriptions set out in the first column of the following Table duties of excise at the rates respectively specified in the second column of that Table:

TABLE


Description of tobacco.
Rate of duty per pound,



s.
d.


Tobacco unmanufactured—



containing 10 lbs. or more of moisture in every 100 lbs. weight thereof
11
3½


containing less than 10 lbs. of moisture in every 100 lbs. weight thereof
12
0⅞


Tobacco manufactured namely —



Cavendish or Negrohead manufactured in bond
13
4⅞

and so in proportion for any less quantity
And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

TOBACCO (DRAWBACK).

Resolved,
 That, as respects tobacco on which there have been paid duties of customs or excise at

the increased rates for which provision is made by any Resolution passed by the Committee of Ways and Means on the same date as this Resolution, drawback shall be allowed at the rates set out in the following Table, instead of at the rates set out in Part III of the First Schedule to the Finance Act, 1939.

TABLE


Description of Tobacco.
Rate per pound.


In respect of tobacco on which full customs duty has been paid.
In respect of tobacco on Which customs duty at a preferential rate or excise duty has been paid.



s.
d.
s.
d.


Cigars
14
9
12
6


Cigarettes
14
6
12
4


Cut, roll, cake or other manufactured tobacco
14
3
12
1


Snuff (not being offal snuff)
14
0
11
11


Stalks, shorts, or other refuse of tobacco including offal snuff
13
9
11
8

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

SUGAR, ETC. (CUSTOMS DUTIES).

Resolved,
 That after five o'clock in the evening on the twenty-seventh day of September, nineteen hundred and thirty-nine, the duties of customs on sugar, molasses, glucose and saccharin, shall be charged at increased rates as follows:
(a) for the full rates of duty theretofore in force, there shall be substituted the rates specified in Part I of the following Table;
(b) the amount of the general preferential reduction in respect of sugar of a polarisation exceeding 98 degrees but not exceeding 99 degrees, shall be 7s. 6.8d. instead of 7s. 04d.;
(c) for the rates of duty theretofore in force in respect of colonial sugar accompanied by a quota certificate, there shall be substituted the rates set out in Part II of the following Table, and any certificates issued under Section one of the Finance Act, 1934, whether before or after the passing of this Resolution, shall have effect accordingly.

Table.


PART I.


FULL RATES OF DUTY.


Article.
Rate of Duty.



s.
d.


Sugar of a polarisation exceeding 98° the cwt.
23
4


Sugar of a polarisation exceeding 97° and not exceeding98° the cwt.
19
3·8


Sugar of a polarisation not exceeding 76° the cwt.
10
0·9


Sugar of a polarisation ex-ceeding 76 ° and not exceeding 97°





Intermediate rates varying between 10s 0·9d. and 19s. 3·8d. per cwt.


Molasses (except when delivered to a licensed distiller for use in the manufacture of spirits or yeast, or to a person for use in the manufacture of yeast in premises used solely for that purpose)—



if containing—
s.
d.


70 per cent, or more of sweetening matter the cwt.
14
9½


less than 70 per cent. and more than 50 per cent, of sweetening matter the cwt.
10
7½


not more than 50 per cent, of sweetening matter the cwt.
5
2½


Article.
Rate of Duty.



s.
d.


Glucose, solid the cwt.
14
9½


Glucose liquid the cwt.
10
7½


Saccharin (including substances of alike nature or the use.
7
6

PART II.


RATES OF DUTY ON CERTIFICATED COLONIAL SUGAR.


Article.

Rate of Duty.




s.
d.


Sugar of a polarisation exceeding 99° Sugar of a polarisation exceeding 98° and not exceeding
the cwt.
14
0·7


99°
the cwt.
12
6·3


Sugar of a polarisation not exceeding 76°
the cwt.
6
4·5


Sugar of a polarisation exceeding 76° and not exceeding 98°





Intermediate rates varying between 6s. 4·5d. and 12s. 6·3d. per cwt.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

SUGAR, ETC. (EXCISE DUTY).

Resolved,
 That after five o'clock in the evening on the twenty-seventh day of September, nineteen hundred and thirty-nine, the duties of excise on sugar, molasses, glucose and saccharin, shall be at the rates specified in the following Table, instead of at the rates theretofore chargeable:

Table.


Article.

Rate of Duty.



s.
d.


Sugar of a polarisation exceeding 99° Sugar of a polarisation exceeding 98° and not exceeding
the cwt.
16
3


99°
the cwt.
14
7·1


Sugar of a polarisation not exceeding




76°
the cwt.
7
5·1


Sugar of a polarisation exceeding 76° and not exceeding 98°






Intermediate rates varying between 7s. 5.1d. and 14s. 7. 1d. per


Molasses (including all sugar and extracts from sugar which cannot be completely tested by the polariscope)—




If containing—
s.
d.


70 per cent, or more of sweetening matter the cwt
10
3½


less than 70 per cent. and more than 50 per cent, of sweetening matter the cwt.
7
5


not more than 50 percent, of sweetening matter the cwt.
3
7½


Glucose—




Solid the cwt.
10
3½


Liquid the cwt.
7
5


Saccharin (including substances of a like nature or use) the 0z.
5
2½

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913.

SUGAR, ETC. (DRAWBACKS).

Resolved,
That, in the case of sugar and molasses produced in the United Kingdom from material on which a duty of customs or excise is shown to the satisfaction of the Commissioners of Customs and Excise to have been paid at the increased rates for which provi-


sion is made by any Resolution passed by the Committee of Ways and Means on the same date as this Resolution, drawback shall be paid under Part II of the Second Schedule to the Finance Act, 1928, as if for references therein to the scales set out in Table 1 and Table 2 in that Part of that Schedule, there were substituted references to the scales respectively set out in Table 1 and Table 2 annexed to this Resolution, and the scales set out in Part II of the First Schedule to the Finance Act, 1934, shall not apply.

TABLE I


SCALE APPLICABLE IN THE CASE OF SUGAR PRODUCED IN THE UNITED KINGDOM FROM MATERIAL ON WHICH DUTY HAS BEEN PAID.


Nature of Sugar
Rate of Duty Paid.
Rate or Amount of Drawback.



Per cwt.
Per cwt.



s.
d.
s.
d.


Sugar of a
23
4
23
4


polarisation
less than 23
4
21
0


exceeding 98°produced from material on which the full duties of customs have been paid.






Sugar of a
17
6
17
6


polarisation
less than 17
6
16
8·7


exceeding 99°produced from material on which customs duty at the general preferential rates has been paid.

Nature of Sugar.
Rate of Duty Paid.
 Rate or Amount of Drawback.



Per cwt.
Per cwt.



s.
d.
s.
d.


Sugar of a
14
0·7
14
0·7


polarisation
less than 14
0·7
13
3·4


exceeding 99°produced from material on which customs duty at the certificated colonial rates has been paid.






Sugar of a
16
3
16
3


polarisation
 less than 16
3
15
5·7


exceeding 99° produced from material on which excise duty has been paid.






Sugar of a polarisation not exceeding 98°produced from material on which the full duties of customs have been paid and sugar of a polarisation not exceeding 99° produced from material on which customs duty at the general preferential rates or the certificated colonial rates, or excise duty has been paid.
Any rate of duty.
A draw back equal to the duty charge-able on sugar of the like polarisation.

TABLE 2.


SCALE APPLICABLE IN THE CASE OF MOLASSES PRODUCED IN THE UNITED KINGDOM FROM MATERIAL ON WHICH DUTY HAS BEEN PAID.


Nature of Molasses.
Amount of Drawback per cwt.


Produced from material on which full customs duty has been paid.
Produced from material on which customs duty at the general preferential rates has been paid.
Produced from material on which customs duty at the certificated colonial rates has been paid.
Produced from material on which excise duty has been paid.



s.
d.
s.
d.
s.
d.
s.
d.


Containing more than 80 per cent, of sweetening matter
…
…
…
15
9
12
6½
9
11½
11
7


Containing more than 70 percent. but not more than 80 per cent, of sweetening matter
…
…
…
13
10½
11
0½
8
9
10
2½


Containing more than 60 per cent. but not more than 70 per cent. of sweetening matter
…
…
…
10
1½
8
0½
6
4½
7
5½


Containing more than 50 per cent. but not more than 60 per cent. of sweetening matter
…
…
…
7
7
6
0
4
9½
5
7


Containing not more than 50 per cent. of sweetening matter and weighing not less than fourteen pounds to the gallon
…
…
…
…
5
0½
4
0
3
2
3
8½

In the foregoing Tables—
(a)the expression ' the general preferential rates ' means the full rates of duty reduced by the amounts of the general preferential reductions specified in the Second Schedule to the Finance Act, 1939, as amended by any Resolution passed by the Committee of Ways and Means on the same date as this Resolution; and
(b)the expression ' the certificated colonial rates ' means the special rates of duty applicable to colonial sugar accompanied by a quota certificate.

And it is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1913."

Orders of the Day — INCOME TAX.

STANDARD RATE OF TAX FOR 1939–40.

Resolved,
 That—
 (a)the standard rate of Income Tax for the year 1939–40 shall, as respects the last three quarters of the year, be increased by two shillings to seven shillings and sixpence in the pound;
 (b)the said increase shall be averaged over the whole of the said year so that the standard rate is, in relation to the year and every part thereof, taken to be seven shillings in the pound for all purposes, ex-

cept that for the purpose of the application of Section two of the Provisional Collection of Taxes Act, 1913, to the month beginning on the sixth day of April, nineteen hundred and forty, the standard rate shall be taken to be seven shillings and sixpence in the pound;
 (c)in connection with the said increase, amendments shall. be made in Section two hundred and eleven of the Income Tax Act, 1918 (as amended by Sub-section (2) of Section twelve of the Finance Act, 1930), and special provision made in relation to income chargeable under Schedule C, under Rule 6 or Rule 7 of the Miscellaneous Rules applicable to Schedule D, or under Rule 21 of the General Rules;
 (d)such other amendments shall be made in the Income Tax Acts as are consequential on the said increase."

HIGHER RATES OF INCOME TAX FOR

I938–39.

Resolved,
That Income Tax for the year 1938-39 in respect of the excess of the total income of an individual over two thousand pounds shall, instead of being charged at the rates mentioned in Section twelve of the Finance Act, 1939. be charged at rates exceeding the standard rate by the amounts specified in the second column of the following Table; and that such amendments shall be made in the. Income Tax Acts as are consequential on the foregoing provisions of this Resolution: —

TABLE


For every pound of the first five hundred pounds of the excess
One shilling and threepence.


For every pound of the next five hundred pounds of the excess
One shilling and sixpence.


For every pound of the next one thousand pounds of the excess
Two shillings and sixpence.


For every pound of the next one thousand pounds of the excess
Three shillings and sixpence.


For every pound of the next one thousand pounds of the excess
Four shillings and three-pence.


For every pound of the next two thousand pounds of the
excess
Five shillings.


For every pound of the next two thousand pounds of the excess
Six shillings and threepence.


For every pound of the next five thousand pounds of the excess
Seven shillings and sixpence.


For every pound of the next five thousand pounds of the excess
Eight shillings and sixpence.


For every pound of the next ten thousand pounds of the
excess
Nine shillings.


For every pound of theremainder of the excess
Nine shillings and sixpence."

RELIEFS AND EXEMPTION FROM TAX

Resolved,
 That—

(a) the following enactments relating to reliefs and exemption from tax shall be amended as Parliament may provide by any Act of the present Session relating to income tax, namely—
(i) subsection (2) of section forty of the Finance Act, 1927, as amended by subsequent enactments (which relates to the reduction of the tax remaining chargeable after the allowance of other reliefs);
(ii) section eighteen of the Finance Act, 1920, as so amended (which relates to the personal allowance of married persons);
(iii) section twenty-one of the Finance Act, 1920, as so amended (which relates to relief in respect of children);
(iv) subsection (1) of section fifteen of the Finance Act, 1925, as so amended (which relates to relief in respect of earned income), and subsection (2) of that section, as so amended (which relates to persons over sixty-five years of age);

(v) section nineteen of the Finance Act, 1935 (which relates to the exemption of incomes not exceeding one hundred and twenty-five younds and a reduction of tax in the case of incomes less than one hundred and forty pounds);
(b) such amendments shall be made in the Income Tax Acts as are consequential on any amendments which may be made in the enactments aforesaid."

DIMINUTION OF EARNED INCOME.

Resolved,
 That relief from income tax for the year 1939–40be given to individuals whose actual earned income for that year is, owing to circumstances connected with the war, less than their earned income as assessed to income tax for that year.

Orders of the Day — MISCELLANEOUS.

ESTATE DUTY (INCREASED RATES).

Resolved,
That in the case of persons dying after the twenty-seventh day of September, nineteen hundred and thirty-nine, the rates of Estate duty shall be—
(a) as respects estates the principal value of which exceeds ten thousand pounds but does not exceed fifty thousand pounds, the rates set out in the Second Schedule to the Finance Act, 1930, increased in the case of each rate by one-tenth of the amount thereof; and
(b)as respects estates the principal value of which exceeds fifty thousand pounds, the rates therein set out increased in the case of each rate by one-fifth of the amount thereof."

CHARGE OF EXCESS PROFITS TAX.

Motion made, and Question proposed,
 That—
 (a)where the profits of any trade or business arising in so much of any accounting period as falls after the thirty-first day of March, nineteen hundred and thirty-nine, exceed a certain standard, there shall be charged on the excess a tax of sixty per cent.;
 (b)armament profits duty shall in no case be chargeable and the national defence contribution shall only be chargeable if it is higher than the tax chargeable under this Resolution;
 (c)the tax chargeable under this Resolution in respect of a trade or business for any period shall be allowed as an expense for Income Tax purposes incurred in that period but any repayment of the said tax allowed by reason of a deficiency of profits in a subsequent period shall be taken into account for Income Tax purposes as if it were a profit of the trade or business arising in that subsequent period;
 (d)special provision may be made as to the tax payable in the case of inter connected companies."

6.10 p.m.

Mr. Clement Davies: We shall require further time to consider this Budget and all its ramifications, and to-night I do not propose to detain the Committee for more than a few minutes. In the first place I should like to congratulate the Chancellorupon the clarity of his Budget statement, and also upon his courage and boldness, especially in the matter of the extra taxation which he is, in my opinion very rightly, asking the country to bear. In my view Income Tax is the fairest of all taxes, and if this burden has to be shouldered it is best shouldered by placing upon each of us a burden according to our ability to carry it. The Budget is certainly a comprehensive one. No one escapes an extra burden, and I think that is also right, when we all together have to face this terrible catastrophe of war. But I want to join to-night in the appeal which was made by the right hon. Baronet the Leader of the Liberal Opposition. A sacrifice will have to be made by every person in the land. As a result of this extra taxation some of us will certainly have to cut down our expenses. Some of us may have to change, to quite a large degree, our mode of life. That we are quite prepared to do, I will not say cheerfully, but we will do it resolutely. I am sure that is the feeling of the whole country.
It was manifest to-night, while the Chancellor of the Exchequer was delivering his speech, that the country as represented by this House—because this House does represent the country—is quite prepared to shoulder any burden which the Government calls upon it to undertake at this time. But if we individually are to be called upon to make these sacrifices then it is essential that we should get value for our money. It is essential that there should not be any waste. We ourselves will have to see to it that there is no waste in our own houses and our individual lives, and in the same way it will be absolutely incumbent upon each Government Department to watch expenditure with the greatest care. This war, like the last, will not be won only by the forces in the field or at sea; it will be won by the ability of this country to produce and to keep on producing, to show its continued and growing strength as the war goes on, just as we know that during the last war the enemy, instead of increasing in strength, were decreasing in

strength. That being so, I support the appeal made by the right hon. Baronet for a Select Committee to watch this expenditure. The Chancellor of the Exchequer, who is the guardian of the public purse, made a very powerful plea and I am sure that his colleagues who will be responsible for expenditure will listen to his words, but I think that he ought also to have assistance in keeping an eye upon that expenditure, to have the assistance of a Select Committee such as was appointed during the last war. As I have said, we shall want time to consider all the ramifications of this Budget, and to-night I content myself with these few remarks and with congratulating most sincerely the Chancellor of the Exchequer upon the clarity and the lucidity of his statement.

6.15 p.m.

Mr. Tinker: I think we all realised on 3rd September, when we entered into the war, that we should have to pay the price, both in man-power and as regards providing the money. Everyone understood that, and it was with no light heart that we took on our responsibility, and I think nobody will grumble at having to meet the extraordinary expenditure which faces us. The question is, Is the money being applied in the best possible way. That is the point we have to examine. There are a number of the taxes of which we cannot complain. The Income Tax has certainly gone higher than many of us expected. On these benches we have been conjecturing whether there would be an addition of is. or is. 6d.; one of my friends behind me did venture to say that the tax would be 7s. 6d. I do not think anybody will complain about the Income Tax, because I have always argued that those who are called upon to pay Income Tax always have enough left over to provide for the ordinary needs of life. I have always found that I can afford to meet all the Income Tax calls upon me and still have sufficient for a decent standard of life, and what applies to me applies, I think, to all Income Tax payers.
I have always argued the same regarding Surtax, feeling that it might very well be raised to any extent in the case of those over a certain income, because even after a man has paid his Surtax he is always left with sufficient to live upon. As the hon. Member for Montgomery


(Mr. C. Davies) pointed out just now, a man may have to modify his mode of life and cut out many of the luxuries he has enjoyed before, but at a time like this, when the nation's life is at stake and when, if we were defeated, possibly those luxuries would be taken away altogether, no one can complain if the Surtax cuts deeply. Death Duties too, have always been a very good source of income, and I have often wondered whether the Chancellor of the Exchequer might not examine further the possibilities of cutting deeper still with Death Duties—apart from the case of direct descendants. Where there are sons and daughters they expect to get something from their parents, but beyond the direct descendants we come to a point where the question arises whether anybody has any right to the money before the State gets hold of it, and at a time like this the State ought to have the first call, because we are needing money for a great national emergency.
There are other taxes with which I am not altogether satisfied. I think the case of beer requires examination. It may be said that beer is a luxury, but to the workers in many industries it is not a luxury. The mining community like to think that they can get a glass of beer or a pint of beer without having to pay an excessive charge for it. However, I will not dwell on that point, because it may be argued that they ought to pay some extra taxation at a time like this. But sugar is one of the commodities which I think might very well have been left alone. I regard sugar as being a necessity in many households, and many of those who will be called upon to pay the extra tax upon sugar can ill afford to do so. As the hon. Member for Dumbarton Burghs (Mr. Kirkwood) says, these are the poorest of the community, the old age pensioners. At this time they will be very hard put to it to get a decent or any standard of life. Sugar is going up and we know that other commodities have also gone up in price. Butter has gone up. I saw on Saturday that bread has gone up. Tea will probably go up too. With sugar, they are the four essential commodities that keep body and soul together for those of poor income. Nevertheless they are to go up in price because of war exigencies. It is very unfair to tax sugar when, added to the

other increases, this increase will bear very hard upon the old age pensioners.
In reviewing his Budget statement the Chancellor said he thought that no one would complain at having to bear the extra taxation if it was put on evenly, and he said that he had tried to put it on evenly on this occasion. I do not think that he has put it on evenly. My argument is that these burdens of extra taxation brought about by the war—we all agree that they cannot be avoided in the present circumstances—ought to be borne by those who can well afford to do so without suffering a material fall in their standards of life. In a time of stress like this we ought to examine the matter carefully in order to try to give to the poor the feeling that they will not suffer unduly because of the war, but to-day, regardless of the point which I have been making about the old age pensioners, this Committee seems to be not thinking about them at all and to be putting extra taxation upon their shoulders.
I am wondering how long the House of Commons will allow this matter to remain in abeyance. Are these extra taxes to continue without regard to ability to meet the extra burdens which are put upon these poor people? We know that as we pass on in this war, organised people will fight to retain some standard to which they are entitled. We shall find there will be agitation for increased wages to meet the extra cost that will have to be borne in various ways, and those demands will have to be met. I can see various organisations demanding higher rates of wages because of the burdens they have to meet and the House of Commons, reviewing those demands will say: '' Yes, they ought to have them, "yet we never seem to think how the old age pensioners are going to meet these extra burdens. I put a question to the Prime Minister to-day and I hope that the Financial Secretary to the Treasury will pay some regard to it. It is not sufficient at question time simply to put us off by saying: '' This is not the time to deal with these matters," because so fierce is the agitation on this point that the Government will have to recognise it at some time or other, and will have to deal with this matter of old age pensions. If we go on, stage by stage, putting id. or ½d., and sometimes 2d. on various commodities, how


can we expect the aged people to continue to exist as they are doing at the present time?
Because of the war and of what it is bringing in its train we seem to think in the House of Commons that we can put these matters on one side for the time being, and say: "We should have examined it if the war had not come." Believe me, if war had not come some grant would have had to be made this October, because the feeling on the matter was intense both in the House of Commons and in the country. Now that things are becoming worse for these people we are inclined to think or to say, as the Prime Minister has said, that owing to war emergencies we cannot deal with the matter at the present time. But something will have to be done before every long in this respect. The imposition of this extra burden by way of the Sugar Duty gives me an opportunity of emphasising that point at this time. I trust that there will not be any complacency on the Treasury Bench on this matter, or any thinking that we are overlooking or letting go this fight for the old age pensioners. We shall press this matter on all occasions, in the hope that we shall prevail on the House of Commons to see that justice is done to this deserving class of people.

6.26 p.m.

Captain Hammersley: In time of peace it has been customary on Budget Day for comment on the Budget to be confined to the formal congratulatory speeches from Front Bench Opposition leaders. There is a good deal to be said for a period of a few hours gestation to consider the very difficult problems which are put before us in the Budget statement, but we are living in times of war, and I make no apology for keeping the Committee for a few moments in order to make one or two observations upon the financial problems before the country and one or two comments on the Budget statement. First, I will join with other speakers in a word of congratulation to the Chancellor of the Exchequer upon the way in which he has faced the realities of the situation. He has imposed upon the community grim burdens, but I do not think that anybody who studies the position can believe for one moment that those burdens ought not to have been imposed or that they are

burdens which we ought not to face without delay.
The financial objective of the Budget, as the Chancellor of the Exchequer has said, is to provide sufficient money to wage war successfully without leaving behind a crippling burden of debt for future generations. The Committee will remember that the last war was financed in this way: Over 70 per cent. of the cost of that was was carried forward to posterity. We imposed, as a result of the last war, a burden of very nearly £250,000,000 per annum on future generations, and that burden was intensified by subsequent deflation. The authority of certain sections of the community was enhanced by that burden and the position of the producers was depreciated. The result was a weakening in certain trades, including agriculture, and it was of such a character that up to this time those trades have never recovered.
To those who would endeavour to finance this war on something like the same kind of lines as those on which the last war was financed, I want to make one or two comments. I wonder whether it is realised by what kind of process the loans were raised. The banks utilised War Loan to the extent of 80 per cent. of value as a collateral security. That means to say that any person who wanted to invest £100 in War Loan was able to do so by providing only £20 of his savings. The remaining £80 came from manufactured bank credit. The result of this creation of a tremendous volume of bank credit was inflation, and we are all concerned to avoid the spiral of rising prices followed by the spiral of rising wages. It is impossible to avoid that spiral if we have monetary inflation, and monetary inflation cannot be avoided if we have excessive borrowing. In fact, if the borrowing of the community exceeds the real savings and we rely upon the manufacture of bank credit in order to finance our war loan, we shall inevitably get inflation and we cannot stop the rise in prices.
There is another consideration. If we endeavour to finance this war as the last war was financed, by borrowing some 70 per cent. of the burden, what will be the condition of the country after the war? on a basis of three years, it is a gross under-estimate to say we shall require to borrow £10,000,000,000. From whom shall we borrow it? We shall be able to


borrow it only from those people whom the banks consider to be credit-worthy. Already, as the Committee and the country well know, the proportion of rentiers in the community is as high, probably higher than in any other country in the world, and we should, if we endeavoured to deal with war finance by a system of borrowing, end the war with our proportion of rentiers even greater, which would result in a burden on the producer which in my opinion would be absolutely unbearable. The final result would be to create a feeling of social injustice which would end in a demand for repudiation. For these reasons, as the Chancellor of the Exchequer has said—I agree with him entirely—it is necessary to finance this war by a far greater proportion of taxation and, if we carry out this resolve, we shall be able to finance it much less extravagantly than the War of 1914–18. We shall be able to control prices in the absence of monetary inflation and, expressed in terms of goods and services, the pound sterling will buy more.
How can we pay as we go? The Chancellor has told us his intentions. He has raised the Income Tax to a very high figure, he has extended its incidence, Death Duties have been increased and Super-tax has been more stiffly graded. These matters will provide a substantial amount of revenue. But indirect taxation will, as well as providing materials for monetary wealth, also tend to check unnecessary spending on luxury articles. The question one must ask is, Will these taxes, heavy as they are, produce sufficient revenue for the task before us? They will produce some £ 226,500,000 in a full year. I believe we have absolutely reached the limit of Income Tax. I think that 7s. 6d. in the £ with the possible addition of a Is. National Defence Contribution, whichmakes 8s. 6d., will probably result in diminishing returns, and I am very doubtful whether it will not result in an increase in evasion, but I agree that it is an increase which has to be faced and a risk which has to be run. But we have now, at the beginning of the war, reached what is in my view the limit of Income Tax. I think there is still a certain amount of reserve in Death Duties and in Super-tax, but all these are taxes on what I might call the active section of the nation's wealth. There still remains an impressive total of

passive wealth which has not been taxed. I do not feel that a tax on capital is in itself a good tax. Capital is a very shy bird. You will frighten it on a number of occasions and it will disappear for ever. Another difficulty about a capital tax is this. Capital is difficult to assess and difficult to collect. Nevertheless, in the face of the emergency which confronts the country I feel that a proportion of the capital of the wealthier people in the community should be made available to help in the conduct of the war, just as all the resources of man-power between 18 and 41 are being made available. I feel that some kind of contribution from capital will, during the course of the war, have to be made.
What form shall that capital contribution take? I, personally, prefer that at the end of the war a substantial proportion of the growth of capital during the war should be taken by the State, and I was very gratified to hear that the Chancellor is studying that point. But I want to know, Why just studying the point? There are one or two things which in my opinion should and must be done now, and the first thing to do is to ask for a return of the capital of all Income Tax payers. By "a return of the capital" I do not mean a return of values—it seems to me that that is a later stage—but I think the taxpayer should now, at the beginning of the war, be called upon to make a return of the physical character of his assets—so many shares in such and such a company, a partnership in this firm, land in such and such a place. The question of the assessment of the particular capital can come later. But I think it would be a great pity in the national interest if at the end of the war we were faced with the situation of not being able to tax the growth of capital because we had not in the earlier stages got the necessary information. I realise the difficulties, particularly the difficulties of collection, but I would put this point to the right hon. Gentleman. When he issues his war loan he should make it available at its face value in payment of these Duties. If he does that, and an individual knows that by the altered direction of our war effort he is increasing the capital, he will be the first person to appreciate that in his own interest he should divert some of his capital into war loan because he would then be able to


surrender it at the end of the war in payment of the Duties on the growth of his capital.
I am aware, of course, that in addition to the disadvantages of assessment and collection there is the further disadvantage that during the course of the war it does not give you anything to be going on with, but I think it would be a real and valuable asset to the community and to the financial resources of the nation if we stated that we were going to proceed with this plan seriously. I think the whole Committee welcomes the statement of the Chancellor, which shows that in this war we are going to tax more and borrow less. To achieve the proper proportion between taxation and borrowing, taxes on incomes and inheritance must, in my opinion, be augmented by the substantial taxation of the growth of all capital during the war.

6.41 p.m.

Sir Richard Acland: I appreciate the speech of the hon. and gallant Member for East Willesden (Captain Hammersley), which seemed to me to get down to the really deep problems of war finance instead of the small details of this Budget, which we are not in a condition to consider until we have had time to consider it. I, too, would like to deal with the question of the major problems of financing war. If the Chancellor's proposals today are to be regarded as being in the nature of a temporary expedient, to tide us over the six months or so before this country is organised for a war effort, I appreciate that they are the best that can be put forward, but if they represent the way in which we are going to fight the war as a whole, I am filled with the gravest forebodings. When he introduced his first Budget the Chancellor entertained the House with reminiscences of his predecessor, Mr. Gladstone. It seems to me that he still feels that his task is the same as Mr. Gladstone's, though rather larger.
But a war budget is an entirely different thing from a peace budget. The essence of a peace budget is that the Budget represents a small proportion of the total national income. The total national income is made up of the private payments of one private individual to another in return for the necessities, comforts and luxuries of life supplied by

the other individual. Out of this the Chancellor regretfully takes a part of the money which he requires for national purposes. His whole object, under such an economy, is to maximise the national income, in order that he can more easily get his Budget. But, now that we have changed over to a war effort, the problem is completely reversed. The whole effort must be directed towards minimising individual expenditure on individual needs, in other words, minimising the national income, out of which the Chancellor is to draw his money by the conventional means of national taxation. That method is not likely to work. How unlikely it is to work is shown by the speech given by the Lord Privy Seal on the wireless a few nights ago, when he urged us to spend as usual, in order presumably to provide this pool out of which the Chancellor is to get his money. This means, I suppose, that if at this time of year I would normally be ordering another suit I should order it.
It will be said that production must be kept going. I agree with that, and until there is something more useful for the manufacturers of cloth to do I agree that they should manufacture cloth; but surely, in a war economy, that cloth should be sent to America and sold, even at a loss. That the words of the Lord Privy Seal should divert any part of that cloth to my back at the present time, in order to maintain the pool of income on which the Chancellor has to draw, seems to indicate that we are living in an Alice-in-Wonderland existence, and not facing up to the problems of a war economy. It seems to be thought that there are two pools of national endeavour, one fed by Government orders and the other by private enterprise, and that the Chancellor's task is to draw enough out of the second to fill up the first. But there are not two pools. Private enterprise, except on a very small scale, is, in fact, at this moment dead. You may have a cafe proprietor who is considering closing down in the City and opening in one of the resorts to which his late customers have now transferred themselves; that is going on; but the large-scale private enterprise except for war purposes has gone. Those who make decisions under private enterprise estimate probable incomes, probable costs and probable risks. To-day nobody knows the probable incomes, the probable costs and the prob-


able risks. Therefore, nobody is trying to carry on any substantial private enterprise—and if anyone does try he is met by a barrage of Government restrictions. Therefore, there is only one pool of national endeavour to-day. The whole thing is in the hands of the Government, and the Government have to run it. We have not yet seen any indication that the Government realise that this task is now on their shoulders.
Take, for example, the coal industry, which may be regarded as a pattern of what might happen in other industries. Everybody knows that coal will go up in price; anyone who cannot sell the coal that comes to the surface can hold on to it, and nobody is going to bother about the export of coal or face the difficulties of doing business abroad under the supervision of a censor who, I understand, carries on from a seat in the grandstand at A in tree. As a result the price of British coal in Scandinavia has just exactly doubled in three weeks. The Germans are able to sell their coal at an enormous price in Scandinavia, and thereby to purchase iron ore at very low prices because it is not worth the risk involved to a British exporter in sending his particular parcel of coal to Scandinavia. That is a matter which the Government will have to take hold of and run. More pits have to be brought into production, the less efficient pits have to be brought into production, and their costs have to be covered. Are we going to have a level of prices which will enable them to do that? If we do, the shareholders in the most efficient pits are going to make a mint of money; and, even under the taxation which is proposed, they will be left with half or a quarter of the mint of money in their own hands. The Chancellor of the Exchequer will have to meet the fair costs of bringing that coal to the surface; it will then be his, and he will sell how he chooses, to whom he chooses for whatever purpose he chooses. That will have to be the pattern of our war economy.
Let me give another quite small instance which seems to me to show the unreal-mindedness of the Government in looking at our war problems—the insurance of stocks. The Government seem to have treated that question in a paper, peace-time way. Suppose that an incendiary bomb burns 100 bales of wool. The Government's attitude is that the im-

portant thing is that we should be very sure that the owner is able to make a paper credit entry in his books. Therefore, there would be a fund. The money could be raised in any way in which anybody liked to raise it. For the sake of making the punishment fit the crime, the fund was raised by one of the stupidest taxes imaginable—the 6 per cent. tax on raw materials. It is a tax which has been passed on to the consumer goodness knows how many times by the producer, so that we are paying, in order to raise that fund, far more than we would have paid if it had been raised in any other way. Mean-while what is the real problem when an incendiary bomb burns 100 bales of wool? It is that the nation has lost 100 bales of wool, and that is all.

Mr. Marcus Samuel: May I interrupt the woolly argument, and ask the hon. Member what it has to do with the Budget?

Sir R. Acland: I am only suggesting that we ought to get away from the peace-time economy of looking on these things as a matter of balance sheets, and that we should realise that in war-time we ought to open our minds to the fact that these problems do not work themselves out on paper as profit and loss, but are real profits on materials and goods. What matters is that 100 bales have been burnt, and not the entry in somebody's account. The wool controller, reviewing the stocks of wool and the purposes for which they are required, could either replace the destroyed wool immediately if it is very urgently required, or when he can, if it is urgently required, or perhaps very likely not replace it at all, if the wool was not to be used for any very immediate purpose. It seems very arbitrary and shocking that somebody who was the owner of 100 bales of wool which had been burnt should not have it replaced.
Another thing which is arbitrary and shocking is that shareholders should not receive dividends which they would have received if you allowed the price of coal to go up to the level required in order to bring the inefficient pits into production. That would seem arbitrary and shocking. But war is very arbitrary and shocking, and a great many have to take arbitrary shocks. It is not good enough to ask people to believe that sacrifices are all equal merely because the


rich, out of the larger incomes that they draw from the national endeavour, are asked to make a larger contribution to that national endeavour, unless the rich are going to be exposed to the same, shocks and arbitrary decisions of war. Nothing in this world is more arbitrary than two men going over the top and one being shot and the other not. You could not get anything more arbitrary than that. That is not all. The hon. Member for Abingdon(Sir R. Glyn) last night asked us to consider the case of two stable boys who had 48s. 6d. and left their jobs to receive 3 10s. in a Government factory. He asked organised labour to co-operate to prevent that kind of thing. What about asking organised employers to co-operate to prevent the opposite process which has been going on pretty strongly in the last three weeks? The Prime Minister said yesterday that we are a united nation, and I believe it. We are united, with very few exceptions, in our determination to end in international affairs the contemptuous disregard for the pledged word and the callous indifference of Governments to the sufferings of peoples and the attacks upon their liberties, which have been the feature of the foreign policies of more than one country in Europe.

The Deputy-Chairman (Colonel Clifton-Brown): I do not wish to be hard on the hon. Member, particularly as on a Financial Resolution he can discuss almost everything, but I am bound to say that he is getting very far from what are relevant matters.

Sir R. Acland: I accept your Ruling, Sir, and I will leave that point. I am seeking to say that we shall not preserve this national unity unless, in our financial policy, we convince the nation that all people are being treated alike. Enormous numbers of people have lost the whole of their incomes in the last three weeks, and thousands have been dismissed their jobs after 30 years' service and put on the street, and wages have been reduced—absolutely arbitrary decisions. That is not all. Small business men throughout the country in their thousands have been ruined by the black-out, ruined by evacuation; ruined by petrol restriction; ruined by Government control; all this is absolutely arbitrary—without a penny-piece of compensation. These

sacrifices are tolerably and willingly accepted because they are so much smaller than the sacrifices in the front line, provided that we know that the big men—the Vickers, the Armstrongs, the I.C.I's. and the Iron and Steel Federation and all the rest of them—are also standing with us, prepared to accept the shocks of war right on the point of the chin like any common soldier. That is the kind of spirit in which we have to mould the war-time finance.
We have sufficient resources to carry this war through to victory if we look upon our financial problem as one of paying the wages and salaries of the people who are going to work upon those resources, and convert them into usable goods which we as a nation then use and sell at home or abroad as seems best for our war purposes. I submit that morally, materially and financially we shall not come through this war if we face it in terms of orthodox finance, imagining that we can raise our money out of the great pool of private enterprise, regarding each item in our visible resources as being the property of a particular individual who is to be compensated or paid out in full, or given a fair and reasonable rate of interest, if his particular resources happen to be used for the purposes of the State. We take a man out and kill him and give no compensation, and why should we be so squeamish about property? I may be told that what I am suggesting means that we shall destroy, in the process of the war, everything that we are trying to defend. That is not so. We are going to defend our liberty of thought, liberty of speech, liberty of the Press, liberty of religion, but I do not believe that the ordinary people of this country desire to fight to re-establish the social order which we have seen in this inter-war period. I believe that humanity will demand equality above everything else at the end of this war. As we go into this war and face the sacrifices we must face, I do in all seriousness ask this Committee to consider whether there can be such a thing as equality as long as there is a small fraction of the population, representing none the less a considerable number of people, who are living lives wholly different from ordinary men and women of the country simply because they are drawing an unearned income by right of private property.

6.59 p.m.

Commander Sir Archibald Southby: The Chancellor of the Exchequer is to be congratulated on the way in which he has discharged a difficult and possibly an unpleasant duty. I think that he is most to be congratulated upon the fact that he put so clearly before the House and the country the fact that this war can only be financed in three main ways, first, out of taxation, secondly, by borrowing, and, thirdly, by the exercise of rigid economy. The hon. Member who spoke from the bench below earlier in the Debate said quite rightly that the experience of the last war as regards its being financed out of borrowing was in the main a bad one. It leaves behind it a trail which it is desirable should not be left. The Chancellor of the Exchequer referred to the savings of the community, including, of course, the large taxpayer, with whom he dealt drastically. I suggest that there are very few large individual taxpayers in the country who have been able, during the last few years at any rate, to make any savings whatever. It is better that this war should be financed as far as possible out of taxation from year to year, in order that an undue burden may not be laid upon those who come after us who will, I hope and believe, benefit by the efforts that we are making to preserve their freedom and their liberty. We shall win this war if we approach its difficulties as a united community and if we eschew any desire on the part of one section of the community to score a point off another. We are all in the boat together and we shall all sink or swim together. Only by our combined, united efforts shall we be able to bring the war to a successful conclusion. Therefore, we must face the war as a community trying to understand the particular difficulties that are experienced by the various sections of the community, whether they be blessed with this world's goods or not.
Obviously, extra burdens must fall upon the community as a whole. It is true that extra burdens should fall upon the shoulders of those who have most of this world's goods. Hon. Members and possibly people outside this House sometimes forget that a man is only rich—the term "rich" was introduced by the hon. Baronet who has just spoken—if his income exceeds his commitments. It may well be that a man with a very large

income is not as well off as the man with a very small income, because his commitments may be much bigger than the commitments of the man with the small income. [An Hon. Member: "I would risk it."] The hon. Member opposite says that he would be willing to risk it. If a man's commitments are big and he is taxed, and rightly taxed, heavily, you reach a point at which he can manage to exist only if he reduces his commitments, and the cutting down of his commitments must in the end mean unemployment and the cutting down of the livelihood of many people who are dependent upon him in the state in which he is living.
If the war lasts three years there is nobody in this country, to whatever section of society he belongs, but will have to face a considerable diminution of the standard of life to which he has been accustomed. It will not affect one section of the community but all sections. What should be kept in people's minds is that you want, if you can, to prevent the spread of unemployment by the over taxation of any one section of the community. There was a jubilant cry from one hon. Member when the Chancellor of the Exchequer was discussing the increase in the Income Tax and the Surtax, but it is only fair to realise that there are less than 100,000 Surtax payers whose contribution alone at the present time is sufficient to pay for all the social services, without calling upon any indirect taxpayers to contribute one penny. Let it be remembered that there are only 3,500,000 out of 30,000,000 voters who pay direct taxation.
It seems almost a grim injustice that the Chancellor of the Exchequer should be asking for an increase in Death Duties at the same time that we are asking people to go overseas to risk being killed. I agree that it is necessary, but it does indeed seem to be a grim injustice that you should ask a man to go overseas to defend his country and thereby expose himself to the risk of an early demise, and let him know before he goes that his children will be penalised because of his earlier death in serving his country.

Mr. David Adams: What about the poor?

Sir A. Southby: There is no difference in sacrifice so far as going overseas to


fight is concerned, but you are calling for a different sacrifice from those who are left behind. Let us remember that the sacrifice exists. I believe that Income Tax is one of the fairest forms of taxation that could be devised, but I suggest that from all income there should be a contribution, no matter how that income is derived. A contribution should be demanded from every person in the community, from myself and from the hon. Member for West Fife (Mr. Gallacher). Whether our incomes are derived from this country or from sources abroad does not matter. A contribution should be levied upon that income. If that be so and if the community is to have equal sacrifice, it would be fair to tax incomes, however small. The bigger incomes should pay the bigger contribution, but the smaller incomes should pay something proportionate in direct taxation.
I have always felt that to have allowances for this and that, a portion of income which pays no taxation and a portion which does is something which it would have been wiser never to have introduced. It is not right that any section of society should pay no Income Tax because the income is, say, £300. That encourages the man with £400 to say, "Why am I not exempt?" or the man with £500 to ask the same. In these circumstances it becomes manifest that these is a bartering at times of elections as to who should be exempt. The people of this country, and, above all, the working community, have always been willing to make a sacrifice if it has been put fairly to them, and the circumstances explained. I believe it would be fairer at this time of grave national crisis if a graduated contribution was asked for from every section of the community, from every individual. If you took some small contribution in direct taxation from the man with an income of £3 a week I believe it would be welcomed by the wage-earner as just. I wish the Chancellor of the Exchequer had had the courage to sweep away all allowances in regard to Income Tax. I wish he had had the courage to say that a small graduated tax would be levied upon all wages, because wages are income just as much as is income derived from investments. I believe that would be fair and that it would be welcomed by the people.
What we want is equality of contribution and sacrifice. There is no difference in the equality of sacrifice for those who go into the Services. It is only when it comes to the organisation of economy behind the lines that the difficulty arises. It is right that no one should profit out of thenation's need, and that no one should amass an enormous fortune or have unduly enhanced conditions of life by reason of the necessities of the nation in the prosecution of the war. I know hon. Members opposite will absolve me from any desire to be offensive and I know they realise the truth when I say that it is just as important that there should not be undue demands for the raising of wages because of our war efforts as it is that there should not be demands for increased dividends from companies' profits as remuneration for their efforts in the war. Reference has been made by the Chancellor of the Exchequer to economy. That is something upon which not only hon. Members of this House but the community outside are most insistent. Everyone knows that money is being poured out at the present time for things which could easily be arranged to be done by voluntary effort. One hears of people in London and elsewhere doing air-raid defence work and being paid £2 and £3 per week whose services are available for nothing.
War, I suppose, is the most stupid and futile thing that man ever invented. Unfortunately, it makes inroads not only upon individual happiness and well-being and individual incomes, but also takes a terrible toll of the national resources not only in man-power but in finance. But there is something which is of more value than any amount of money or any quiet and ordered life, and that is the preservation of freedom and liberty. It is no good having material goods if freedom of the spirit and of the individual has gone. I believe that there is no sacrifice which this country will not make, there is nothing which the community will not do, to preserve the freedom and liberty which we possess in this country and in the Empire. But let us have from first to last real equality of sacrifice. I beg hon. Members to let this country become a real community, where there shall be no jubilation because one section is taxed and another section happens to go scot free. Let us put our heads together in amity and common sense and devise a


system of direct taxation to which everyone shall contribute. I am not afraid of asking the working man to contribute something out of his weekly budget because I believe he knows, as I do, that it is only by the mass contribution of the men and women of this country, made in good will, that we shall bring the war to a satisfactory conclusion.

7.13 p.m.

Mr. Richards: I do not intend to follow the hon. and gallant Member for Epsom (Sir A. Southby) in his disquisition concerning the equality of sacrifice. Anyone who knows the Income Tax system of this country knows that the poor are still paying a heavier proportion of their income by way of indirect taxation than the rich, and if the Chancellor of the Exchequer has done anything at all he has really done something in this Budget to rectify that anomalous position. No one in the House would envy the task imposed upon the Chancellor of the Exchequer this afternoon. It seems to me that a September Budget on the top of an April Budget is simply piling on Pelion and making the burden almost unbearable. I feel that the Chancellor of the Exchequer was looking back with some considerable regret at the considerable Budget he introduced at the end of April. That Budget, as he pointed out, assumed that he was going to get in taxation £942,000,000 and that he was going to borrow £380,000,000 in order to meet expenditure, but to-day he has told us that borrowing has leapt up to nearly £1,000,000,000. That is a basic fact which we must remember. As the hon. and gallant Member has pointed out, the question of borrowing is a very serious one. It means that we are leaving a considerable burden for probably a greatly impoverished generation to bear in the future. The Budget which the Chancellor of the Exchequer introduced in April—I am taking the old figures and not the corrected figures—was a total sum required by borrowing and taxation of £1,322,000,000, the heaviest Budget that has ever been imposed on the people of this country. It was heavier than any of the Budgets introduced during the late war. The Budgets of 1921 to 1924 are the only ones which really approximate to it.
The Budget introduced in April last was presumably a peace Budget; at any rate we were at peace, although we were

making frantic efforts to arm ourselves for the catastrophe which has overtaken us. I was interested to compare it with the last peace Budget introduced by the right hon. Member for Carnarvon Boroughs (Mr. Lloyd George) in 1914 just before war broke out. That Budget was introduced in May of that year and the total he expected to derive from taxation then amounted to only £226,000,000, about one-quarter of what was expected by the present Chancellor of the Exchequer as the result of his Budget of last April. Even in 1916–17 the total amount derived from taxation was only £336,000,000, about one-third of what was required by the Chancellor last April. It is quite obvious that a great mistake was made in our taxation system during the last war, because the amount that was levied, even in 1916–17, was only one-third of what has been levied this year when we were at peace. This brings me to the point that if you take the Budgets between 1914 and 1921 you will find that the amount which was raised by taxation was only one-quarter of the amount which was borrowed, and I think most people are agreed by this time that that is essentially the wrong way of doing it. It is better that we should get the bulk of the money we require for the war by direct taxation. This must have come home to the Chancellor of the Exchequer himself. Here we are facing a tremendous struggle, and he has had in the Budget of April last, which of course is still operative, to carry a considerable burden of not less than £230,000,000, which is the direct result of the bad financing of the last war. Consequently, the moral is fairly obvious. It is that in this war we should do everything we can to raise by taxation the money that is required, because borrowing really leaves the country very much poorer than does even a system of very heavy taxation.
Another point to which I wish to draw attention is the very different position in which we find ourselves to-day compared with 1914–1918. I do not think anybody can say that at that time the rate of taxation was heavy. I have pointed out already that taxes even in 1916–17 yielded just one-third of what they are expected to yield this year. Therefore, they were not extraordinarily heavy. We must remember also that in those years we were a very considerable creditor nation, the most important creditor nation in the


world. British capital was invested in all parts of the globe and one of the results —unfortunate, I think, from some points of view—of that tremendous straggle between 1914 and 1918 was that we had to call on a great deal of that capital and the money had to be invested in war loan, as will be the case again. That had the effect that we were not able to get commodities from abroad as we had been able to get them when we were a creditor nation. Raw materials and food came to this country in the form of interest upon the money that had been invested abroad, and consequently, we were able to feed our people, clothe our Army, and provide munitions, because foreign countries were indebted to us and the form which the interest took was raw materials and foods.
This time we are not in that favourable position. We are not anything like the creditor nation that we were in 1914. I may receive the reply that we can borrow abroad, as we did to a considerable extent in 1914–18. When we speak of borrowing, what we mean really is trying to persuade other nations to hand over the raw materials and food we require and postpone payment for a certain time. I presume that all hon. Members remember the disagreeable story of the American debt. I do not know what is the position with regard to that at the present time. Perhaps the Financial Secretary to the Treasury will tell us exactly what is the position now with regard to the American debt. I suppose it is in a condition of suspended animation, but I think that if one approached an American and spoke to him about it, he would take a very different view. I am afraid that in future borrowing in America will not be nearly as easy as it was during the last war. I have raised these points because I feel that hon. Members have, perhaps, a false sense of security in some respects. The position with regard to taxation is very serious, and I think that the estimates last April of the product of taxes showed that there was a very serious decline in some of them. We must find most of this money at home this time. We cannot draw on those resources, which indeed in some cases have dried up; and our relations with America are perhaps not quite as favourable in this respect as they were in 1914–18.
The net result is that the money must be found in this country, and this raises

a very important difficulty. As I see the position, there are two ideals even on the Government Front Bench. For example, the ideal of the Fighting Services, and even of the Minister of Supply, is that everybody should be either in khaki or in dungarees. They think that the war is going to be won by actual fighting. I recall the saying of Napoleon that he was defeated—and it galled him considerably—by a nation of shopkeepers. But Napoleon really sensed the true position. He realised it was not the navy and the army, as such, that had beaten him, but really the great industrial and commercial power of this country, which was then beginning to show itself. That has been the case with every subsequent war. Our soldiers and sailors, it goes without saying, have fought manfully, but behind them there has been the tremendous industrial productive capacity of the ordinary people of this country. If they are not allowed to pursue, to some extent, their ordinary avocations, if they are not prepared to produce the wealth which the Chancellor is going to seize, I do not see how we are going to succeed in the magnificent effort that we are making in other fields. I think this is possibly the most difficult matter which statesmen have to decide nowadays— exactly how to apportion the labour power and capital of this country so that we do not destroy our economic life. I was particularly glad to hear the Chancellor emphasise the importance of our foreign trade. We shall win this war, as we have won every war, because of the tremendous productive power which this country has, and which is to be put at the service of the community in order that we may pull through. This is a consideration of vital importance. It is of vital importance to the Government and to all of us. We must not run away with the idea that the people in khaki or engaged in munitions work are the people who are really winning the war. The war will be won by the ordinary workman sticking to his job and continuing to produce things which even the Army, the Navy, and the Air Force require, and which give us that resilience which we require when the struggle is at its worst.

7.29 p.m.

Mr. Loftus: As I know that several hon. Members wish to speak, I shall confine my remarks to a small compass and


direct them practically to one point; but before doing so, I have a commission to execute. My hon. and gallant Friend the Member for the Exchange Division of Liverpool (Sir J. Shute), who has had to leave London, was most anxious to put to my right hon. Friend a question with regard to the National Defence Contribution, and he requested me to ask the question for him. It is this. The National Defence Contribution was origin-ally suggested as a tax on armaments profits only, but hon. Members will remember that it was then modified, and became a tax on all profits. My hon. and gallant Friend wishes to ask: Is this tax to be continued at is. on all profits where the profits have fallen instead of risen —and the whole underlying point was that they were all rising—on top of the 2s. increase in the Income Tax? That is the point which my hon. and gallant Friend wished me to put.
I do not propose to comment on the Budget in general. I realise that my right hon. Friend the Chancellor of the Exchequer had a most unenviable task. One of the main problems which he had to face was that of deciding the proportions to be raised by direct taxation and by loan, respectively. My hon. and gallant Friend the Member for West Willes-den (Captain Hammersley), in a most interesting speech, discussed that problem and pointed out that the amount raised by taxation depends a great deal on bringing into use all the productive labour and plant of the country. If you get full activity in employment and industry, you will raise your taxes, but today we have not full activity. There are still many unemployed, and my fear is that this Budget may have a deflationary effect, check the coming in of these taxes and intensify the fall that has already taken place in receipts from existing taxes.
I now turn to the main problem to which I wish to direct the attention of the House. I feel it is essential, when this heavy taxation is being placed on all sections of the community, that the money so raised should not be expended in paying unnecessarily high rates of interest on the new war loan. I am a little concerned as to what that rate is to be, as a result of what happened some four weeks ago. Then, the Treasury was borrowing great sums at approximately 15s. for every £100. I understand from a

letter written by a banker to the "Manchester Guardian" to-day that the City expected that to go on. They expected that when war came the Treasury would intensify control; that the discount houses would be instructed to buy Treasury bills at that rate of interest; and that the banks and the big finance houses would be firmly requested to take up allotments of long-term war loan at very moderate rates of interest. What happened? There was suddenly a change. The Bank Rate, four weeks ago, was raised from 2 per cent. to 4 per cent. Under the old orthodox working of the Gold Standard, that was justifiable and necessary, but to-day we have abandoned the Gold Standard. We are living under a managed and controlled currency. There is the strictest control, and I submit that that was an unnecessary and heavy expense on the taxpayers, which could have been avoided.
Let us see what the result has been. Four weeks ago, we taxpayers, through the Treasury, were raising money at 15s. interest for every £100. The Bank Rate was raised and next morning we were raising that money at, approximately £3 15s. for every £100 instead of 15s. for every £100. What must not that have already cost the taxpayer? I suggest it may already have cost the taxpayer something equal to 6d. in the and I read that the City Editor of the "Daily Mail" has said that in one week's borrowing, the extra interest paid was £900,000. There is another result. To maintain the level of gilt-edged securities is of enormous importance. Gilt-edged securities had been sagging and, of course, the raising of the Bank Rate intensified that fall. So, control had to be applied at once and a fixed minimum price, otherwise they would have sunk lower.
I admit that before the rise in the Bank Rate, gilt-edged had been falling. Why? I think for one reason only. A psychological impression had got about that when the war came, the old level of credit in the last war of about 5 per cent., would be re-established, and it was the fear of capital losses that made the investor put his money on deposit, where he got only one-half per cent., instead of putting it in Government securities where he could get 3¾ per cent. Then, of course, when the Bank Rate was raised, instead of getting one-half per


cent. the depositor got 2 or 2½ per cent. which was, again, a direct incentive to go on hoarding and depositing, in the hope of getting higher rates of interest, instead of investing in Government securities. I suggest very strongly that just as the hoarding of food at a time like this is a crime against the State, so the hoarding of money is against the interest of the State, and the Treasury should take every step to prevent it. They should even see that those who hoard money on deposit, waiting for the chance of appreciation in Government stocks, do not receive interest on those deposits but rather pay interest on their deposits, if that is necessary in order to force the deposit money into the investing market. I believe if we had had a larger issue of Treasury Bills we could have avoided the fall in gilt-edged Government securities.
Regarding the present position, we are about to float in the coming months great war loans. What steps will be taken to secure a reasonable rate of interest? By "reasonable," I mean about 3 per cent. I submit with all humility to my right hon. Friend, who is so experienced in these matters, that the first thing we must do is to banish from our minds all the old ideas based on the functioning of the Gold Standard. Secondly, we must discard completely the old idea which was prevalent during the last war, that the Treasury has to compete with other borrowers in the open money market. Under the control system which is established to-day, the Treasury has not to compete. It has the power to become the only borrower, for practical purposes, and to fix its own rate of interest. Further, I would say, with all the emphasis at my command, that at a time when the Government are, quite rightly, preparing to stop profiteering in goods and the prices of goods, they should be just as determined to stop profiteering in money and the prices of money. My hon. and gallant Friend the Member for West Willesden described very interestingly the actual procedure by whichthe war loans in the last war were raised and floated and the methods used by the great financial institutions. I recognise the very great services which the joint stock banks rendered in the last war and ever since, and the very great ability with which they are conducted, but I find a general feeling even in the most unex-

pected quarters that during the issue of the war loans in the last war these great financial institutions did make large profits, and in a time of national emergency care must betaken that again there is restriction of profits in all directions, including any profits made on the issue of these loans.
Turning to immediate measures, I hope we shall see an immediate reduction of the bank rate to 2 per cent. This would indicate, first, that the Government propose to continue their cheap money policy; second, it would restore confidence in gilt-edged securities and cause an immediate and very sharp upward swing in the price of gilt-edged; third, it would drive the profit mongers into the investment market, which is just what we want. Let the Government issue Treasury bills at the old rate of 15s. per cent. If the banks were reluctant to take those Treasury bills, I think the Treasury could request and even compel the Bank of England to take them. Other banks would then have to conform or allow their cash deposits to be swollen, earning no interest whatever. In other words, a position would be reached very similar to that at the time of the great conversion in 1932, when a somewhat similar procedure was adopted. At that time some of us were told that the public would take cash for their loans, but they could not, because, owing to Treasury control, all securities had to conform to the low rates of interest of the new issues, and, therefore, cash was no use, because there was no opportunity to invest at the old rate that existed before the Treasury took these means to force down the interest. I hope my right hon. Friend the Chancellor will forgive me for bringing this point, which he did not mention in his interesting and able speech, perhaps rather vehemently before the House, but I feel that it is essential that a great proportion of the money that is to be raised in increased taxation should not be paying high rates of interest on war loans as in the last war, and I feel that I myself could not support any issue of war loans above a rate of 3 per cent.

7.44 p.m.

Mr. Gallacher: As I listened to the Chancellor of the Exchequer introducing his Budget this afternoon, I looked around and wondered to myself what hon. Members on the other side had to think about the whole situation, for it seemed


to me to be a most terrible commentary on the capitalist system. Here you have proposals presented before this House to raise masses of millions of pounds, and no question of opposition being raised for the purposes of destruction. Yet if those millions had been raised in peace-time to better the conditions of the people of this country, we could have been living in a paradise. I am told, of course, that in connection with these taxes there will be a fair deal all round and that the wealthy will have to contribute a very considerable share of their wealth, but I am prepared 'to challenge the Chancellor of the Exchequer or the Financial Secretary on this point. I do not care how much they may have increased the Income Tax or the Super-tax, I am prepared to stake my life on it that at the end of the war the wealthy will be wealthier than they are to-day, unless we succeed in changing the system in the meantime. The Financial Secretary cannot get up at that Box and show where during the past year there has been the slightest decrease in the wealth of the wealthy, despite the Income Tax and Super-tax. On the contrary, there has been a continual, steady increase in the wealth of the wealthy. There is no question of a fair deal all round, and there never has been. How is it possible to talk about a fair deal all round when the workers every day are contributing their labour? Even now they are being asked to sacrifice hard-won trade union rights, which means an intensification of the rate of production. It is the workers who contribute everything, but the wealth is taken by a handful of the wealthy.
The hon. and gallant Member for Epsom (Sir A. Southby) told us that the Super-tax payers were only 100,000 in number and that they contributed, apart from any other taxation, sufficient to meet the whole of the social services. There is something to ponder about. Of course, he did not understand what he was presenting before the people of this country when he used that argument. It meant that 100,000 people in this country have as much to spend on themselves as is spent on the whole of the social services of this country.

Sir A. Southby: Perhaps the hon. Member does not appreciate the point that the argument goes to show that there is a

large percentage of people in this country who are not directly taxed.

Mr. Gallacher: I understand that perfectly, but think of the millions of people who are absolutely dependent on the social services—mothers, children, old folk, unemployed, education, health services, the whole ramification of social activities throughout this country. Millions upon millions of people depend on the social services, and 100,000 people in this country are able to spend as much on themselves in a year as is spent on the whole of those social services. Such a system as that cannot possibly continue. What have we got at the other end? Taxation on beer. I never take beer but I know that it is a common refreshment for masses of the workers. There is taxation on beer, tobacco and sugar on top of the other taxation. That bears terribly on the masses of the people. It is utter nonsense for Members to say that every income should be taxed If the father of a family brings in a wage which is not sufficient to provide the essential food and clothing for his wife and children, how can anyone say that that wage should be taxed?

Sir A. Southby: Nobody has said so.

Mr. Gallacher: That was the argument of the hon. and gallant Member for Epsom (Sir A. Southby).

Sir A. Southby: It may be what the hon. Member thinks was the argument, but that does not make it the argument.

Mr. Gallacher: The hon. and gallant member said that we should have an equal tax on incomes.

Sir A. Southby: I never said an equal tax and the hon. Member must not misrepresent me. I said a graduated tax on all incomes—a very small amount for small incomes and a very large amount for big incomes. The hon. Member may criticise what I say, but he is not entitled to twist, alter and misrepresent it.

Mr. Gallacher: I am sorry if I used a wrong term and gave the impression that the hon. and gallant Member meant an equal rate for all wages and incomes. What he meant was that there should be on every wage and income, no matter how small or large, a tax of some sort approximating to the amount of the wage


or income. He said that he was prepared to go to any section of the working class and advocate it and that the working class would be prepared to accept such a proposal. There are, however, many millions of people whose wages are not sufficient to meet the ordinary weekly commitments. That is why there is such trouble in many parts of the country about rents, for if they pay rent they have not the money to buy food and clothing. In this Budget the poorest of the people are affected by the taxes on beer, tobacco and sugar. My hon. Friend for Leigh (Mr. Tinker) asked what was to be done to make it possible for many of the poorer people to live, such as old age pensioners. How can they pay these extra taxes? Take an old man with I0s a week, accustomed to half an ounce or an ounce of tobacco. With this additional 1½ d. it means that he cannot buy it The extra tax on sugar means also that he cannot buy that commodity.
There is no question of the application of justice in these taxes. While we have in the hands of certain people countless millions which they cannot properly use, there should be no taxes on people who cannot get the necessities of life. Take the awful conditions that have been exposed as the result of evacuation in Scotland. Think of the unspeakable poverty that has been exposed and the suffering and neglect that have arisen out of it. How can these people pay extra for these commodities? I am certain that many of us on these benches are going to see to it that the present system does not last. It is impossible to carry on as things have been going. It is obvious that Members on the other side are beginning to feel very strange about the situation which will face them. The Chancellor of the Exchequer said that our position is very grave, but that we have the consolation that the situation in Germany is worse. That is capitalism. He went on to show how inflation worked before in Germany and how it is likely to work again. That means that the masses of the German people will suffer just as the masses of the people of this country will.
The Chancellor continually referred to the necessity of victory in the war, but if he is building up Budgets on the basis of a war lasting year after year with

victor and vanquished at the end, he will be faced sooner or later with something much worse than making a speech at that Box. The constant desire for victory in the war will produce the same situation as faced both the victors and the vanquished in the last war. That is not what anybody should advocate. It is a war of extermination that will mean the massacre of the young manhood of Germany and the young manhood of this country. We do not want to raise money for that. We want to raise all the money we want and to direct all the energy and determination of the people of this country in order to get peace at the earliest possible moment with the minimum of sacrifice, a peace that will guarantee freedom for the people of Europe. That is what we should budget for and not this talk about a war of extermination.

Sir A. Southby: The hon. Member, I presume, desires to give peace to those people in Poland who have been overrun by Russia?

Mr. Gallacher: If the hon. and gallant Member cares to read the "Times," or, if he is not satisfied with that, cares to visit Poland, he will find that the one people in Europe who will have peace at the present time are those people in the Polish areas occupied by the Red Army. They not only have peace from the threat of Nazi bombs and guns, but peace from the landlords and capitalists.

Sir A. Southby: And peace for ever in their graves.

Mr. Gallacher: They have their own organisations in the towns which Russia has occupied and have begun to organise a new life free from all the robbery that went on before—robbery which is represented here by 100,000 people who can spend as much in one year as is spent on our social services. If we face the Budget from the point of view of victory and the extermination associated with victory, we shall never be able to meet the liabilities that are imposed upon us. Many of us on these benches are deter mined to do whatever lies in us to get a different conception—

Mr. David Grenfell: Do not say "us" please.

Mr. Magnay: At any rate, in this country we are not going to wipe out poor


people by the million, as Russia did, by allowing them to starve.

Mr. Gallacher: The hon. Member for Gateshead (Mr. Magnay) can always be relied upon to present in our Debates something of a most irrelevant and utterly unintelligent character. If he wants at any time to produce evidence in support of what he has said, I shall be prepared to deal with it. I am now dealing with the fact that many of us here do not want a conception of a Budget that is designed for a war which is anything in the nature of the last war—a war of victors and vanquished in which millions of young men are simply sent to the slaughter. We conceive of the Budget as means of ensuring a determined effort on the part of the people of this country to win the people of Germany and all the peace forces in Europe for the earliest possible peace which will be of a lasting character and will guarantee freedom throughout Europe. That is what we desire, that is what should be in the minds of Ministers, that is what they should present instead continually presenting it in the form they do, which can only cause embitterment and strengthen the forces that are making for war. I feel very strongly that if at the moment, instead of a new Budget, we had got what the people of this country want, a new Prime Minister and a new Government, a Government which can be trusted by the people of this country and the people of Europe, it would not be long before we should see the end of our troubles and trials.

8.1 p.m.

Mr. Lipson: I hope the hon. Member for West Fife (Mr. Gallacher) will forgive me if I do not follow him in all the points which he has raised and if I say that I cannot agree with him when he brings in his King Charles'head by saving that the solution of all our troubles lies in a change of Government. I do, however, find myself in agreement with him when he says that the masses of the German people will suffer from the inflation which is probably inevitable as a result of the war, and I hope that he will use such influence as he has and such means as lie within his power to bring that home to the German people, so that they may realise where the policy of their present leader is likely to bring them. He said that the Chancellor of the Exchequer was raising these immense

sums for purposes of destruction, but 1 do not believe that even the hon. Member would suggest that we ought not at this moment to be resisting the Nazi attempt to dominate Europe. Nobody would be more pleased than the Chancellor himself, no doubt, if those vast sums could be used for the constructive arts of peace, and I am sure everyone in the country would welcome it, particularly when one realises what use could be made of the money. But we have to be practical, we have to realise the menace to our freedom, and because of that, and primarily, I believe, through the folly of one man, we are called upon to bear this gigantic expenditure.
A great many people have been asking whether we were at war or not, but after the very grim Budget which has been presented to-day I think an increasing number of them will realise that we are at war and what modern war means. There is only one test which we ought to apply to this Budget, and that is whether it is the kind of Budget which is likely best to serve the national interests in this emergency. I think the people are prepared to make sacrifices provided they believe that those sacrifices will have the desired effect. I have tried to visualise the effect of some of these Budget proposals upon the lives of many of our citizens, on the lives of retired people who have to depend upon their dividends, on the lives of the people whom they employ, and on the shops with which they deal, and I am somewhat concerned about the effect this steep and sudden increase in the Income Tax is likely to have in many sections of the community. The retail trade will be very hardly hit by the war. The black-out is already having a serious effect on trade by reducing considerably the hours of business. The petrol ration will also have a serious effect on the motor industry. I believe that one effect will be a great rise in unemployment among people who cannot find alternative work in serving the wartime needs of the country.
More than one hon. Member has said that as a result of the Budget practically everyone in the country will have to revise his standard of life. As a result of that revision, which will be a revision downwards, a great many people will be thrown out of work. People will be prepared to make this sacrifice if they are satisfied that it is a sacrifice which is


shared by all sections of the community, but I think they will hesitate to do so if they see that certain sections of the people are able, in spite of the Budget, to make considerable profits for themselves as a result of war activities. I would ask the Chancellor of the Exchequer why the amount to be taken by the Excess Profits Tax is limited to 60 per cent.? In my own constituency are many men and women living in retirement who have served this country in various parts of the world and whose children are to-day fighting for this country. They will have this very serious cut in their own incomes, and at the same time will know that those who are engaged in war industries will be able to keep 40 per cent. of the profits they make. I feel strongly that nobody ought to make a profit as a result of the war and I would wish that more drastic action was taken to deal with any profits that may be made.
We are promised that that matter is to be dealt with at the end of the war, that capital increases in private fortunes made out of the war will be subject to some levy. Frankly, I am sceptical not about the honest intentions of those who make the suggestion but about its practicability if it is left till after the war. During war, when there is a unity among the people, a sense of the justness of the action would make it possible to carry it through successfully, but after the war there will be an entirely different atmosphere, and I am afraid that steps will be taken to evade any such measure. I am doubtful of the practical results to be obtained by a levy on capital, because one effect of a levy on capital is that it tends to make capital disappear. The right form for taxation to take is the taxation of income. Therefore, I hope that the problem of war profits will be dealt with during the war by a very stiff levy on excess incomes made from the war rather than by taking only part of the increase now and leaving the rest to be dealt with afterwards.
I would remind the Committee that this Budget, heavy as it is in the burdens that it imposes on the people, is only the first war budget with which this country will have to deal. Nobody can say how many successors it is likely to have, and therefore one asks whether the Chancellor has left himself sufficient reserve

to enable this country to face the additional burdens that are bound to accrue and the call that will be made upon the national finances if the war continues for any length of time. We have been told that the Germans started this war practically upon a war basis, so far as the life of the people is concerned, and that those conditions prevailed even before thewar broke out. I am wondering whether the Chancellor, in the proposals which he has made to-day, has not made too heavy his demands upon the public purse to enable him to meet his expenditure. I say that, not because I think the people of this country are not prepared to bear their fair share of the burden required, but because, if the trade of the country is to continue and if we are to carry on in such a way that we can make wealth by normal trade at the same time as it is being destroyed in the war, only in that way shall we be able ultimately to win the war, so far as finance is concerned. In this country we have the very great advantage over our opponents that, thanks to the Navy, the whole world is more or less open for trade with us. We must see that we do not take any step at home which will make it more difficult for that to be possible.
I do not want to sit down without saying that I share the views expressed by hon. Members on the other side with regard to no help being given to old age pensioners. If the case before the war broke out was strong for an increase it is even greater now. In spite of the fact that we are dealing with very great problems we ought not to lose sight of the men and women who are suffering very real and increasing hard ships as a result of the war. As we are fighting for great ideals and are calling upon our men and women to make great sacrifices, we ought to show that we appreciate the position of those old people and that we are anxious that everybody in the country should have a square deal. In spite of the very heavy demands upon the national purse I wish some means could be found to alleviate the lot of the old age pensioners. I feel so strongly about this matter that I am quite willing to co-operate with Members in other parts of the House to help to bring this about.
I share with other Members who have spoken the desire that there should be economy in public expenditure, and I


hope that the Government will take note of the suggestion that a Select Committee of this House should be appointed to scrutinise very carefully the details of Government expenditure. I noticed during the Chancellor's speech that one of the passages which received the most applause was a request to the local authorities to exercise economy. Speaking from many years' experience as a member of two local authorities, I must say that I have never been able to understand the alarm and concern felt in this House about so-called extravagance on the part of local authorities. Those two local authorities and, I believe, every other local authority, do something which this House does not; they have finance committees that scrutinise most carefully every form of public ependiture that is proposed by their other committees. If we were to adopt the proposal of appointing a Select Committee of this House we should be following the example which local authorities have set and we should be in a much stronger position to advocate economy for them.
In this House we say that local authorities arc extravagant and we call upon them to economise. When I attend meetings of my county council or of the town council at home, the blame for the increasing expenditure there is always put upon this House. I think, therefore, the truth is that each body which knows how it spends its money is satisfied that the expenditure is justified and that it is getting full value. If there are possibilities for economy in local expenditure, I hope that they will be carried out. I want to say clearly and emphatically, however, that that should not be done by cutting down the social services. That is not my idea of economy. In conclusion, I should like to join with other speakers in testifying to the clarity with which the Chancellor has put his Budget before the Committee and to the courage with which he has faced a most difficult and what must have been to him a most uncongenial task.

8.18 p.m.

Mr. E. Smith: I desire to make a few observations upon the statement made by the Chancellor this afternoon and to raise a matter of urgency. I hope that the Financial Secretary to the Treasury will direct the Chancellor's attention to the matter which I desire to raise, and that notice will be taken of it by the represent

tatives of the Treasury who are present. I also hope that between now and Friday the whole of this House will give attention to what I consider is a matter of urgency.
In the 1934 Finance Act, the Treasury agreed to the encouragement of the home production of petrol. At that time the Treasury were prepared to agree to an indirect subsidising of the production of petrol from fuel mined in this country. In addition, several deputations waited upon representatives of Government Departments, and at that time Ministers and officials representing Government Departments were prepared to give consideration to the suggestions that were being made, although the financial position did not warrant their embarking upon expenditure of that character. Those who have taken an interest in this problem and, in particular, those who are associated with trade unions and prominent research workers in the engineering and allied industries, as well as in the mining industry, are aware of the urgency of this question now, by reason of the rationing of petrol. I agree that the rationing of petrol was necessary. Anyone who knows anything about modern warfare and the consumption of spirit and petrol and other oils in the Air Force and for transport must be aware of the importance of rationing it, and not only in order that the maximum amount can be conserved and economised for the armed forces.
This is the effect of the rationing already. In the industrial areas the introduction of the internal combustion engine, and the perfecting of engines which derive their motive power from petrol, have completely revolutionised the methods of transport, and the lives of the people have been organised upon the basis of the transport in those areas. They depend upon transportation sometimes for five, six or seven miles outside the area, owing to housing schemes. London is not affected to the same degree owing to the larger amount of electrification—buses, tramcars and underground. The people have not felt it as they have in areas like Manchester, Stoke-on-Trent, Glasgow and Newcastle. I want to plead with the Committee to give attention to the problem before Friday in order that encouragement may be given to industrialists and research workers who are endeavouring to perfect alternative motive power as a means of transport. I


suggest, in particular, that they should give attention to alternative methods in regard to producer-gas, crude oil and oil from coal in order to stimulate interest in it, so that municipalities and transport companies can convert their present engines as the result of slight adaptation. It would only mean removing two seats from the back of the omnibus and placing under them some of the modern bottles which can now be used for the purpose of carrying producer-gas. I am not suggesting any one alternative. It is for the Chancellor and the Financial Secretary and the specialists at the Board of Trade and Treasury officials to decide which is the best, but before Friday they should come to a decision, after consulting the Secretary for Mines and his specialists, in order to enable this to be done.
I welcomed the Chancellor's statement with regard to the desirability of avoiding inflation. I would join with the hon. and gallant Gentleman the Member for East Willesden (Captain Hammersley), who also supported the right hon. Gentleman, in regard to the need for the avoidance of inflation. We know how seriously it affects our people and what it gives rise to, and we want to plead with the Chancellor to do all he possibly can to avoid it. We have raised the matter several times in the past few months but have not seen much of a concrete character done by the Government yet. In a democratic State it is right to expect that simultaneously with organising to win the war and to win the peace there ought to be development of the social services. If the people of the country are to be called upon to make the sacrifices that they have done in the past, and to maintain the spirit that they are showing now, they also ought to be given greater hope than they have had in the past, and this can be done only by bringing about a fair distribution of wealth and the development of the social services.
Since 1930 we have been able relatively to maintain our standard of living. That has been done very largely through the movement to which we belong, by the collective bargaining system which has been built up. I should like to contrast that with what has been taking place in Germany. These figures are produced from German sources. Since 1934 real wages have been reduced from 13 to

22 per cent. While we are pleading for an increase in old age pensions, in Germany they have been reduced by 40 per cent. Taxation, until just before the war, has increased by at least 10 per cent. in most cases, and food has become poorer. There have been 1,266 new millionaires created and 180 multi-millionaires. Therefore, one has an unanswerable case in pleading for the development of the social services and an increase in old age pensions. I should have no hesitation in going on to any platform at any meeting packed with people diametrically opposed to us politically. I have so much confidence in the case we could state that I would guarantee to carry the meeting with me irrespective of the political opinions of the audience. It is good to hear the hon. and gallant Gentleman joining with us, and anyone with any humanitarian feelings is bound to join with us in our plea. The Chancellor says that the total outlay for this year would be £2,000,000,000. When he mentioned that figure I thought how few people realised what it means. Contrast that with the small amount that it would mean to increase old age and widows' pensions.
The Chancellor proposed an increase in Surtax. I noticed that this would only mean an increase of £8,000,000. He said he was proposing a penny increase on sugar. This is increasing the indignation of people with regard to the position of old age pensioners. Their purchases of commodities are confined within very narrow limits. The main essentials which they are bound to purchase have already gone up by Id., 2d. or 3d., and the cumulative effect of these additional pennies and two pences is very serious for them. In my division the other day I saw a man speaking to a woman who was standing at her door. He was a club collector, and had called for her weekly subscription. The woman said, "I have nothing for you this week; I have been buying blinds, black paper and all that sort of thing, and I cannot afford to pay." The people are ready to do all this sort of thing, but when their mothers and fathers, the old people, come to visit them, they rightly complain because, while they are prepared to make the maximum effort, so that the nation can pull together, the old people are treated in this way.
The Chancellor said that the Budget is intended to enable us to get the best


out of the nation's resources. I wish to call attention to a resolution passed by the Transport and General Workers' Union executive—a responsible body, which does not come to decisions of this kind without justification—and which is supported by many trades councils in various parts of the country. It suggests that, owing to these pennies, twopences and three pences being put on the price of essential commodities, there is growing concern, and although the people do not want to give expression to that they are being forced to do so: first, because of the effect on limited incomes; secondly, because of the effects on old age pensioners; and thirdly, because they do not want to get into such a position as they were in during the last war, when inflation came along and they had to demand increased wages, and so got into a whirlpool which affected the whole nation. The hon. Member for Ince (Mr. G. Macdonald) put the following question to the Financial Secretary to the Treasury on 2nd August:
 whether he will state the total revenue received from indirect taxation during the financial year 1930–31; and the latest estimates of revenue from indirect taxation during the current financial year?
The Financial Secretary replied:
 The figures are £240,918,000 for 1930–31, and £343,430,000 for 1939–40." — [OFFICIAL REPORT, 2nd August, 1939; col. 2389, Vol.
That is an increase of £102,500,000 in taxation upon the food of the people of this country. When hon. Members are contrasting the sacrifices made by certain sections of the community they should not forget that since 1931 indirect taxation has been going up like this. Although there have been reductions, I could, if there were time, show from official figures that the aggregate effect has been an increase in indirect taxation since 1931.
Hon. Members have referred to the need for economy. Let them look at the financial accounts for the United Kingdom for 1938–39. They will see where economies can be carried through to the extent of millions of pounds. Thousands of pounds are being paid to retired civil servants of all descriptions. While I would be the last not to give credit where it is due, and while I believe in rewarding service to the State, when I contrast the pensions which are being paid to those people with pensions of I0s. a week to

old people, I feel that economies should be carried through in this case before the Government start touching the social services or the expenditure for which the municipalities are responsible. If I had the time I could quote from page after page to show where millions of pounds could be saved at the expense of relatively well placed people, who would still be able to maintain a very high standard of living even after such economies had been carried through.
My final intention is to point out that from 1914 to 1918 the wages of miners increased by only 78 per cent., whereas the cost of living went up by 120 per cent. The Miners Federation of that day appointed a deputation which waited upon the right hon. Gentleman the Member for Carnarvon Boroughs (Mr. Lloyd George), when Mr. Robert Smillie, speaking on behalf of the miners, agreed to withdraw a demand for an increase of wages if the Government wouldcontrol food prices. The Government, through the right hon. Gentleman, agreed to control food prices, but they did not do so. Food prices went up and up, and profiteers went on profiteering. This is what happened as far as coal owners were concerned. In 1913 their profits were £13,000,000; in 1914, £14,000,000; in 1915, £25,000,000; in 1916, £32,000,000; and in 1917, £26,000,000. This gave rise to unrest among the miners and among other workers, and we are now pleading with the Government that there shall be no repetition of that sort of thing, but that as soon as possible concrete action should be taken to prevent the profiteering which is at present taking place. Additional pennies and two pences are being put on here and there at the expense of poor people, and pounds are being put on in other directions. The President of the Board of Trade has given an undertaking that the Government intend to introduce legislation to deal with the growing increase in prices. It is most essential that legislation should be introduced as soon as possible in order that our people should not be forced to take any action which they do not desire to take.

8.38 p.m.

Mr. M. Samuel: I am going to address the Committee only for a very few minutes, and I do not intend to follow any of the speeches which have been


made, although I would like to refer to the speech of the hon Member for Stoke (Mr. E. Smith), who has followed the usual procedure of showing one-half of the balance sheet only. He mentioned that the taxation of the food of the people had increased by £100,000,000. As a matter of fact, although the taxation on food increased by more than £100,000,000, wages, between 1931 and the present day, I believe, have increased by £600,000,000 or £700,000,000. In an earlier part of his speech he admitted that the conditions of the workers had improved, so that he was not entirely hiding the whole of the balance sheet, except when he came to figures. I forgive him because I do not think it was intentional, and I am sure he will forgive me for mentioning the whole of the facts.
The Chancellor of the Exchequer has had a very hard task, and I think he has succeeded in imposing taxation, as he said himself, for a maximum contribution. In reading the Blue Book issued concerning the German-Polish relations at the outbreak of hostilities between Britain and Germany, I noticed that Sir Nevile Henderson reported to Viscount Halifax that Herr Hitler, when warned, said that Germany had nothing to lose and Great Britain much. That was the gambler's last throw, and if the Committee will allow me I should like to use it as the basis of the remarks which I propose to make on this new Budget. Truly, we have much to lose. Hitler has put the clock back—the clock of the social services and everything else. I do not say that the social services will be put back, but they cannot be put forward. We are not, however, going to follow his methods and ruin the works. We intend to keep going, so that we may not lose the social fabric which hon. Members opposite so much admire, the social machine which we have so carefully and cautiously built up for so many generations. Germany lost everything when Hitler lost his head. It is true that the Hitler machine gave employment, but what employment? The manufacture of a bloody mangle to squeeze the life blood out of the human race.
Since we were forced into rearmament we have heard much of the desirability of paying as much as we possibly can as we go and borrowing as little as possible. I think we are in agreement that the Chan-

cellor of the Exchequer has gone as far as he possibly could to carry out the desires of all members of the community, without endangering the economic fabric. We must all work together, stick together and stick to our work. The bill is a tremendous one. It runs into astronomical figures. Our future taxation will undoubtedly be the heaviest in the world, as it has been since the last war; but our constitution and our institutions will remain intact. Some people think that it would be unjust for this generation to saddle posterity with an enormous load of debt and financial obligations. I will not make the obvious reply by asking what has posterity done for us, but rather I would draw attention to the fact that we have already done much for posterity, and surely we cannot be asked to do very much more. The limit of direct taxation so far as the present generation is concerned has been reached. Therefore, I think the Chancellor of the Exchequer has been well advised in the proposals he has put before us for distributing the burden in this war equitably between to-day and to-morrow.
This war is a job of work which we are performing not for ourselves alone, not for this generational one, but also for the generations to come. I feel it to be my duty to call the attention of hon. Members of all parties to this particular point. We are fighting the Germans to rid this generation and our children's children of a menace which could only end in the destruction of civilisation and in which all the good work which has been done by this country in the shape of social services and of honest dealings among nations would be lost. At whatever cost we have to fight this war, and there will be no complaints among the people. We have to deal with a ruthless foe who is fighting an unjust war. We, on our part, must do justice to all concerned. The Chancellor of the Exchequer has had to be ruthless. This Budget is a ruthless Budget, but it is in a just cause.

8.45 p.m.

Mr. David Adams: I desire to tender my warmest congratulations in no perfunctory spirit to the Chancellor of the Exchequer for his great Budget speech to-day. It will stand without question among the great efforts of Chancellors of the Exchequer of this country, and I think we may justly affirm that its clarity was not greater than its pungency, which


the whole community of Britain will observe when the full weight of the Budget falls upon them. Nevertheless, it is true that there never was a cause for which the people of this country were more prepared to pay the full measure of the burden which is called for. I felt, as the Chancellor of the Exchequer developed his speech, that perhaps we were going to have what I have long desired, a restitution Budget, that is to say, that there should be either some remission of taxation as far as the poorest sections of the community are concerned or that at least it would be stationary so far as this Budget would affect them. But T was grievously disappointed, as no doubt other hon. Members were, to find that the tobacco and sugar taxation, which will largely fall, although not exclusively, upon the industrial workers of the country, will amount in a full year to £S16,000,000 in the case of tobacco and £18,000,000 in the case of sugar. But this is not the total amount of taxation raised on commodities. These are additional burdens which will be borne largely by the masses of the people.
When we contrast that with the treatment meted out to those who will pay Excess Profits War Tax and find that they are permitted to retain 40 per cent. of their income from this source, it does not seem that there is equitable treatment as between class and class. The Excess Profits Tax, which was imposed during the last war and which reached as it did 75 and 80 per cent. at one time, still left very high dividends payable to the shareholders of the concerns which were paying this Profits Tax. Old age pensioners and persons with fixed incomes, and workers generally, will feel a substantial added burden to the struggle for existence. I thought that it would have been recognised by the Chancellor and by the Government in these hard times, that there should be some better approach to equality of sacrifice. The statement made by an hon. Member opposite that every person in the State who earns anything, wages or salary, interest or dividend, should alike be called upon to pay Income Tax is carrying absurdity to very fine lengths.
It cannot be disputed that some 50 per cent. of the industrial workers are still not receiving an adequate return for the services which they render to the country. Their incomes are still too low, they

suffer from unemployment, from insecurity, and, as a result of low wages, from under-nourishment, with continual attacks on their physical standard, comfort, general happiness, and social life. A greater part of indirect taxation is borne by the workers than by any other class in the community. If the bread-winner volunteers for service or goes to the war, the family at home suffers a reduction in income. If the home is bombed, they may, unlike any other section of the community, lose all. Therefore, hon. Members on this side are dissatisfied, and I am particularly dissatisfied, because the county of Durham is the most impoverished county in the kingdom, in spite of the fact that it has produced a greater amount of wealth over a period of years than almost any other county.
The Chancellor said that we should employ all the nation's resources. In view of that, I think a very singular thing has been done by the Ministry of Health. At their injunction, all housing progress has been brought to a standstill. We have not had an adequate explanation of why that should have taken place. It cannot be that the labour is required in some other field of activity for munitions purposes. The Ministry of Labour possesses the necessary powers to transfer labour by agreement from one part of the country to the other or to any industry in which it maybe required. As a result of this sudden, arbitrary stoppage of housing activity, the workers are suffering in many slum areas, which in the main are situated near munitions centres, and are, therefore, subject to greater possibility of assault than other parts of the country. I think the Chancellor might well make representations to the Ministry of Health as to whether there are not some parts of the country in which housing activity should be permitted in order that these workers may be removed from dangerous areas which are contiguous to arsenals and so on, as is the case in the North of England, particularly Newcastle. Factories are being laid idle as a result of the cessation of housing, and men are unemployed. In my area, we have something like 20,000unemployed in spite of the activity in shipping and shipbuilding and arms. Therefore, the policy to which I have referred seems to be a short-sighted one, and one which I hope will be rectified.
Permits for the export of goods to countries where the exchange is against us are rigidly forbidden. Are we satisfied that that is wise? When we consider the state of employment and of taxation would it not be better in the interests of the national income that the profit which will ensue to this country from the operations of trading concerns, large and small, should be preserved by allowing a certain amount of trade with those countries where the exchange may be, for the time being, against us?
A question which directly affects my constituency, and, indeed, the coalfields generally has been referred to by the hon. Member for Stoke (Mr. E. Smith) in his wise speech. That is the question of the additional production of fuel oils from coal. I notice that there are only 130 benzol plants associated with the great gas industry in this country. Motor benzol is urgently required, yet only 50 per cent. of the gas undertakings of the country have plants for its manufacture. If these were fully engaged, we should, it is estimated, produce an additional 200,000 gallons of motor benzol. That is a very important factor in the national economy. We have taken great powers to deal with the labour and industry in many directions. Have we not the power and authority to compel the gas industry to respond to the nation's requirements in this respect? I find, from inquiry, that where these plants have been set up they are running on a basis which is profitable to the industry and there can be no justification for a refusal to proceed on the lines I have indicated.
Another matter of some importance, if not of overwhelming importance, is that of the commodity war insurance tax. I doubt whether insurance is the right term to apply to it. It is a compulsory levy on industry, and its result has been to force up prices. A rate of 6 per cent. per annum imposes a heavy burden on certain industries. I am definitely advised, on excellent authority, that in the case of Tyne side it amounts to the last year's income of certain of the firms involved. This means the closing of works and the reduction of personnel and is not advantageous to the community. This arrangement should be optional and firms should have their choice whether they enter into it or not. At worst, it should be graduated. There are certain minerals

and other commodities which, even in the case of a serious bombardment, would suffer little damage, while others would suffer much. This commodity war insurance tax, which is only in its experimental stage, should be modified in order to prevent the stagnation which it is producing in certain industries and the unfortunate rise in prices which it is causing.
I turn to a more interesting aspect of the Budget statement, and that is the question of additional resources for the Chancellor. I am certain that he will be glad of advice in these matters, for no doubt he has received very little advice during late months as to how we should foot the bill. He seems to have overlooked, say, the taxation of ground values. I am advised that that would give him a round sum of £100,000,000 in the first year, and, of course, it could be increased from time to - time. Perhaps the Financial Secretary will have a word or two to say as to whether he is converted to the view that these ground values, which are not created by the individual who enjoys them, but by the presence, by the necessities, by the expenditure of the general body, should be taxed; and, of course, the Chancellor of the Exchequer himself in other days was a most ardent advocate of the rating and taxation of ground values.
I now come to a point on which I have a grievance and on which perhaps the whole of the Opposition will feel that they have a grievance, and that is the question of a levy upon wealth. The Prime Minister specifically pledged this House that in the event of war it would be equitable that, when you conscript life and limb, you should impose a tax upon wealth. In my judgment, the Chancellor is not fulfilling the obligation of the Prime Minister in stating that any taxation of wealth must wait till the conclusion of hostilities. How do we know that the present Government will be in office then? What may be the condition of the country generally? There is no guarantee that it will be possible to impose a tax upon wealth sufficient to justify the benefits which the wealthy may have had during the war period. While I cannot say that the party on this side has committed itself specifically to the suggestion that I am going to make, at all events I believe that there should be a tax upon wealth each year that the war


continues, and the tax might well be on fortunes over £20,000. I find that there are 120,000 persons in this Kingdom who own in the aggregate £10,000,000,000, so that a 2 per cent. tax would bring in to the Chancellor each year the sum of £200,000,000. Persons owning, say, £100,000 would merely pay the sum of £2,000 as a war tax upon wealth. It is not an inequitable or an unreasonable sum for the wealthy to pay, when we all know that during the progress of the war that particular class in the community is bound to make very large additional sums and that it will be in a position, without the slightest difficulty, to pay the amount that I have indicated.
The Government have set an estimated period for the duration of the war of three years. Surely a special additional tax for each of those years of 2 per cent. upon the wealthy section of the community cannot be described as inequitable, payment to be made in cash or title deeds to various forms of wealth. One of the arguments that used to be advanced that this was impracticable does not prevail to-day, because it is merely an extension of the valuation that takes place in order that the Death Duties shall garnishee their proportion of the wealth that may remain. The House will be interested in knowing that Sir John Anderson, as Chairman, as he then was, of the Inland Revenue, described this double valuation as quite practicable, so that we need not go to any higher authority for the case with which the Government can carry out this tax. There can be no allegation that it would be ruinous or unjust to any section of the community. It has already been promised by the Prime Minister. Let us see that the pledge is honoured, not at some subsequent date, but forthwith, and that the Finance Bill will be so reorganised that this taxation shall be included. I agree that there should be, if it is possible, equality of sacrifice. I know the ardent desire of the masses of the people that anything for which the State calls which is just and equitable shall be forthcoming from them and theirs, but just as they are prepared to make their full contribution to the State, so must other sections of the community play their part in this great national endeavour.

9.8 p.m.

Sir C. Granville Gibson: I was interested in what the hon. Member for

Consett (Mr. David Adams) said about the advisability of the imposition of a capital levy on the wealth of the country, which he put at £10,000,000,000. I sometimes smile when I hear Members speak so glibly about imposing a capital levy as though the business and commercial men of the country kept all their wealth locked up in boxes.

Mr. David Adams: The Prime Minister has promised it.

Sir C. G. Gibson: I do not mind what the Prime Minister has said. I am a business man and I know perfectly well, and I know the Prime Minister and everyone on the Front Bench know, that as regards industrial and commercial interests there is probably not one in four which has a credit balance at the bank. If it were not so there would not be hundreds of millions of pounds overdrawn on the banks to-day. To-day not one in three of the business men in the West Riding of Yorkshire, where I come from, have credit balances in the bank. Hon. Members above the Gangway seem to think that you can just put your fingers on as many thousands as you wish as though it were liquid money which could be touched at a moment's notice. That is not the case. The hon. Member has just congratulated the Chancellor of the Exchequer on his wonderful Budget speech. I am one of those who realise the crushing severity of the burden upon all sections of the people, from the lowest to the highest. No matter whether it is the working man or the business man, it is a burden which will be very hard to bear, and it is one which can only be carried if there is a feeling and spirit of patriotism. The burden is so heavy that in the case of the higher incomes, as was pointed out by the Chancellor, it means as much as 17s. in the £, and no doubt hon. Members above the Gangway would be very pleased if it came to another 3s.

Mr. E. Smith: We are the patriots.

Sir C. G. Gibson: But they overlook one grave and important fact, which is that you can only build up the businesses and the wealth of the country from reserves. That is how the businesses and the wealth of this country have been built up in days gone by. It is those resources upon which we are able to call at this time to see us through the grave difficulties with which we are faced,


and with which I believe the 46,000,000 people of this country are determined to grapple until the war has been brought to a successful conclusion. The Chancellor of the Exchequer said there would probably be a capital levy after the war. It seems to me that one is being imposed to-day.
There are two questions I should like to put to the Financial Secretary to the Treasury. The first is whether the Excess Profits Tax is to continue for any particular period or whether the period is limited. I believe that the old E.P.D. extended over a period of three or five years. My second question is,. If there is a limitation of the period when that period comes to an end is there to be any repayment of losses which are made after that time? If not, and if business men are paying these heavy taxes during the war, when the slump comes, as it inevitably will—it comes after any war, any type of boom—then we shall have the industries of the country going down like a lot of ninepins. That would have happened after the last war if it had not been for the repayment in many cases of E.P.D. which had been paid during the war. I think those two questions are of some importance.
The Chancellor of the Exchequer made two remarks which I thought were perfectly accurate, very much to the point and of very great importance. The first was that our export trade is vital to the prosecution of the war, and the second was that we must bend our energies to increase our export trade. I fully agree with those observations. In this House there is not a large percentage of business men—I mean business men actively controlling businesses of their own. I do not mean to say there are not a number of hon. Members who are not business men; I was referring to business men controlling businesses. We are not of a very vociferous nature, we are not very talkative in this House, but I feel that I ought to express, as I believe I can to a certain extent, the feelings of anxiety on the part of business men in the country at the crushing burdens which will be imposed as the result of this declaration of the Chancellor to-day. Anyhow we must face the issue, because it is realised that the most important thing for all of us is that we carry through this

war to a successful conclusion, no matter how heavy the burden.
With regard to the export trade, if there is one thing which is necessary at the present time it is that we should be able to obtain our licences to export within a reasonable measure of time. If there is one Department of the Government in which there is absolute chaos today it is the Department which deals with the granting of export licences. I admit that it has been in existence for only three weeks. I understand that the chaos is so terrible to-day that there are between 20,000 and 30,000applications on the desk at Inveresk House. Thousands of applications for export are going in every day, but a large number of them remain unreplied to. This is going on day by day, and hundreds of thousands of pounds worth of goods are awaiting shipment, yet nothing can be done because no replies are coming. As one who is interested in the export trade, who only came back about a week ago from a business visit to Canada and the United States and two months ago was in Scandinavia, Warsaw, Finland, Norway, Sweden and Denmark, and who spends quite a lot of time upon foreign business, I realise that it is very important that we should have decisions quickly in regard to the granting of these permits, one way or the other.

The Chairman: The hon. Member must not pursue this subject too far. It is a question of administration, and not one which will come under the Finance Bill.

Sir C. G. Gibson: I only ask for your guidance, Sir Dennis. I want to stress the importance of the issue with all speed of these licences in order to assist the export trade, upon which the Chancellor of the Exchequer laid such stress, for the successful prosecution of the war. Will you please advise me where I am going astray?

The Chairman: The hon. Member has made his point and perhaps a little extra latitude was given in allowing him to do so. He must not make further observations on the subject.

Sir C. G. Gibson: I will leave that point, concluding it by saying that one way to expedite the granting of these licences would be by less decentralisation and by Inveresk House taking more responsibility on their shoulders. Now I


would touch on the question of compulsory insurance referred to by the hon. Member for Consett. There is no doubt that the figure of 1½ per cent. for each three months—

The Chairman: That matter is not relevant at all to this Resolution. The hon. Member seems to have been led astray into thinking this is a Debate on the Adjournment, but we are not on that question. We are on the Budget Resolutions.

Sir C. G. Gibson: I was assuming I was in order because the hon. Member for Consett dealt with the matter for a considerable time and I was following on the same lines. Anyhow, I must obey your Ruling. Therefore, still dealing with the necessity for doing all that we can to foster the export trade, I will now come to the question of transport. Transport has a great deal to do with the economic production of goods for export. We are informed by responsible Ministers that there is enough petrol and oil in this country to last for years, but nevertheless road transport cannot get petrol for the conveyance of goods.

The Chairman: I am afraid again that this subject does not come at all under these Resolutions.

Sir C. G. Gibson: Well, I will deal with another point, Sir Dennis. I will come to the question of local expenditure, with which the Chancellor of the Exchequer dealt this afternoon. There is no doubt that in every large town and city in this country to-day an enormous amount of expenditure could easily be saved, because thousands of men and women are being paid £3 a week for doing work which in many cases should be done by voluntary labour. In my own city there are quite a number who are the sons and daughters of people of considerable means who ought to be only too glad to do it without payment whatever. I hope the Government will pay attention to the

matter. I should like again to express my feeling, not of disappointment but of anxiety, as the result of the Chancellor's speech, and at least I hope that every section of the community will spare no effort to bring about a successful issue of the fight in which we are engaged by doing all they can, through industry and commerce, to provide the sinews of war.

Motion made, and Question, "That the Chairman do report Progress, and ask leave to sit again," put, and agreed to.—. [Major Sir James Edmondson.]

Resolutions to be reported To-morrow.

Committee also report Progress; to sit again To-morrow.

FOOD (DEFENCE) BILL.

Order for Second Reading read, and discharged.

Bill withdrawn.

LOANS FACILITIES BILL.

Order for Second Reading read, and discharged.

Bill withdrawn.

POULTRY INDUSTRY BILL [Lords].

Order for Second Reading read, and discharged.

Bill withdrawn.

The remaining Orders were read, and postponed.

ADJOURNMENT.

Resolved, "That this House do now adjourn." — [MAJOR SIR JAMES EDMONDSON.]

Adjourned accordingly at twenty-three Minutes after Nine o'clock